Reason Foundation - Policy Areashttp://www.reason.org/areas
info@reason.org (Reason Foundation)http://www.pjdoland.com/chai/?v=0.1TSA's Failure to Discover Fake Weapons Epitomizes Agency's Problemshttp://www.reason.org/blog/show/tsas-failure-to-discover-fake-weapo
<p>The Transportation Security Administration&rsquo;s (TSA) recent failures to detect fake weapons and explosives were worse than first reported. Not only did the TSA fail 67 out of 70 tests conducted by the Office of the Inspector General (IG), the IG testified before Congress that it was not the sophisticated &ldquo;Red Teams&rdquo; with specialized training but rather regular auditors &ldquo;who lack specialized background or training&rdquo; that conducted the tests.&nbsp;</p>
<p>More troubling than the results (and it is challenging to find something more troubling than a 95% failure rate by ordinary auditors) is some folks attempt to explain them away. Earlier this month on the The Bill Maher show, security expert and former Bush administration official, Philip Mudd, complained that we are too hard on the security screeners. According to Mudd the security screeners stand for hours doing a thoughtless job and we give them these incredibly challenging tests. It is unrealistic to expect them to pass these tests or stay focused on their job. This stunning response silenced even Maher. While I could write an entire missive on Mudd&rsquo;s unbelievable comments, I want to focus on something more concrete.</p>
<p>Mudd, in that statement, unintentionally highlighted just about everything that is wrong with the TSA.&nbsp;</p>
<p>The first problem is the culture. The TSA has long been an agency where failure is tolerated largely because TSA reports not to the traveling public who are its customers, but to bloated federal bureaucrats and 535 members of Congress who mettle in its everyday affairs. In political science terms, bureaucracy is designed to be slow and difficult to change, exactly the opposite of what is needed for major security threats. Worse, TSA defenders such as Mr. Mudd make excuses its poor performance. The well-paying TSA positions do not even require a college degree.</p>
<p>The second problem is the federal work rules. Rules prevent split shifts forcing the agency to hire more workers than is necessary. Specific job rules limit the variety of tasks TSA officers can perform, leading to TSA workers performing one specific monotonous task for hours. And managers receive even more protection than rank and file TSA workers. A twice-fired TSA manager who oversaw the Honolulu airport&rsquo;s international terminal, where 30-some TSA workers failed to properly screen passengers, was reinstated to his job due to civil service protections. Three other Honolulu managers successfully appealed their firings over the same incident. Three other managers fired for other dereliction of duties cases have also been rehired.</p>
<p>The third problem is the inherent conflict between TSA as a screening agency and TSA as an overseer. The agency has been empowered as both the Legislative and Judicial branches destroying the typical system of checks and balances. TSA auditors are loath to discipline its workers because that will make its management look bad. TSA workers do not want to bring security concerns to auditors for fear of management reprisal. TSA conducts internal tests of its security, but those are not made public because doing so would make the agency look bad. The only reason we found out about the 95% failure rate is because the Independent Inspector General investigated, and even that report may have remained secret if it were not leaked.&nbsp;</p>
<p>Given these problems, it is not surprising that the TSA fails to do its job every day. Despite its $8 billion budget and 62,000 employees the TSA has repeatedly failed to uncover hidden weapons. Several years ago in Fort Myers 43 workers were fired or suspended because they failed to perform random screenings. In the past five years, the TSA has purchased equipment that has not worked, hired screeners without checking their backgrounds (a clear violation of hiring practices), and started a behavior detection system that, according to the Government Accountability Office, was an utter failure.&nbsp;</p>
<p>The solution is far more complex than simply firing an interim administrator, as the Obama administration did, which is the equivalent of shuffling the deck chairs on the Titanic. The entire TSA organization needs to be reformed. The most important need is to shift TSA&rsquo;s screening duties to an outside entity. The screening duties should be shifted to a private provider. Private providers conduct the screening in several airports across the country including San Francisco. And repeated independent tests confirm that these security operations are cheaper and much more effective. TSA would continue to set the overall screening parameters and monitor the private screening companies. Most importantly, since the screening companies would have no connection to TSA, the agency would feel free to terminate the contracts of ineffective companies. And if any screening company fails 95% of its tests, its contract should be terminated. This is how security screening works in most of the developed world. No other country has this built-in conflict of interest between the screeners and auditors.</p>1014280@http://www.reason.orgTue, 16 Jun 2015 15:32:00 EDTbaruch.feigenbaum@reason.org (Baruch Feigenbaum)Annual Privatization Report 2015http://www.reason.org/news/show/annual-privatization-report-2015
<p>Now in its 28th year of publication, Reason Foundation's <em>Annual Privatization Report</em>&nbsp;is the world's longest running and most comprehensive report on privatization news, developments and trends.</p>
<p><em>Annual Privatization Report 2015</em>&nbsp;details the latest on privatization and government reform initiatives at all levels of government. The individual sections include:</p>
<ul>
<li><a href="http://reason.org/news/show/apr-2015-state-privatization" target="_blank">State Government Privatization</a></li>
<li><a href="http://reason.org/news/show/apr-2015-federal-privatization" target="_blank">Federal Government Privatization</a></li>
<li><a href="http://reason.org/news/show/apr-2015-education" target="_blank">Education</a></li>
<li><a href="http://reason.org/news/show/apr-2015-air-transportation" target="_blank">Air Transportation</a></li>
<li><a href="http://reason.org/news/show/apr-2015-surface-transportation" target="_blank">Surface Transportation</a></li>
<li><a href="http://reason.org/news/show/apr-2015-transportation-finance" target="_blank">Transportation Finance</a></li>
<li><a href="http://reason.org/news/show/apr-2015-criminal-justice" target="_blank">Criminal Justice and Corrections</a></li>
<li>Local Government Privatization (<em>COMING SOON</em>)</li>
</ul>
<p>Additionally,&nbsp;in May&nbsp;2015 Reason Foundation announced that&nbsp;Purdue University President and former two-term Indiana Governor Mitch Daniels is the recipient of the&nbsp;inaugural Savas Award for Public-Private Partnerships, a new award&nbsp;recognizing an individual or organization whose actions improved the cost-effective provision of public services through partnerships with private organizations. More information about the 2015 Savas Award for Public-Private Partnerships is <a href="http://reason.org/news/show/savas-award-2015-privatization">available here</a>.</p>
<p>Your comments on <em>Annual Privatization Report 2015</em> are important to us. Please feel free to contact us with questions, suggestions or for more information. For the most up-to-date information on the rapidly changing privatization world, please visit Reason's <a href="/areas/topic/privatization">privatization research archive</a>, and sign up for our monthly <a href="http://reason.org/newsletters/privgovreform/">Privatization &amp; Government Reform Newsletter</a>.</p>
<p>Leonard C. Gilroy, Editor<br />Director of Government Reform, Reason Foundation<br /><a href="mailto:leonard.gilroy&#64;reason.org">leonard.gilroy&#64;reason.org</a></p>1014235@http://www.reason.orgMon, 08 Jun 2015 09:00:00 EDTleonard.gilroy@reason.org (Leonard Gilroy)Airport Policy and Security News #106http://www.reason.org/news/show/airport-policy-security-news-106
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">TSA screening failures raise major questions</a></li>
<li><a href="#b">Good news/bad news on airport capacity</a></li>
<li><a href="#c">PFC battle's new wrinkles</a></li>
<li><a href="#d">Perimeter security still getting short shrift</a></li>
<li><a href="#e">Does U.S. airport privatization have a future?</a></li>
<li><a href="#f">Refine <span class="SpellE">PreCheck</span>, says bipartisan House bill</a></li>
<li><a href="#g">News Notes</a></li>
<li><a href="#h">Quotable Quotes</a></li>
</ul>
<p><strong><a name="a"></a>TSA Screening Failures Raise Major Questions</strong></p>
<p>The results of recent DHS Inspector General "Red Team" testing of passenger checkpoints were so bad that DHS Secretary <span class="SpellE">Jeh</span> Johnson dumped TSA's Acting Administrator and called for major revisions in screening operating procedures. Because the IG report apparently reveals major vulnerabilities in current operations, it's understandable that it remains classified. But with checkpoint screeners having failed 67 of 70 tests, Congress's Homeland Security Committees need to ask some very hard questions of DHS and TSA in coming months.</p>
<p>We should have seen this coming, based on previous reports from the DHS Office of Inspector General. Last September it released a one-page "Spotlight" report&mdash;basically an unclassified summary of a report called "Vulnerabilities Exist in TSA's Checked Baggage Screening Operations." (OIG-14-142, September 2014) It reports on Red Team operations at an undisclosed number of airports not at passenger checkpoints but on checked baggage screening operations. The summary states, "We identified vulnerabilities in this area caused by human and technology-based failures. We also determined that TSA does not have a process in place to assess or identify the cause for equipment-based test failures or the capability to independently assess whether deployed explosive detection systems are operating at the correct detection standards." It also reports that having spent $540 million for checked baggage screening equipment since 2009, "Despite that investment, TSA has not improved checked baggage screening since our last report in 2009."</p>
<p>A more detailed report on all airport screening equipment&mdash;passenger and checked baggage&mdash;came out just last month, titled "The Transportation Security Administration Does Not Properly Manage Its Airport Screening Maintenance Program." (OIG-15-86, May 6, 2015) It found that "Because TSA does not adequately oversee equipment maintenance, it cannot be assured that routine preventive maintenance is performed or that equipment is repaired and ready for operational use." This report also cites a Government Accountability Office (GAO) report from July 2006 (GAO-06-795) which found that TSA "did not have policies and procedures requiring documentation for the review of contractor-submitted performance data," nor did it have "reasonable assurance that contractors were performing as required." That was <em>nine years ago</em>. The May 6<sup>th</sup> DHS report finds that today "Neither GAO nor TSA could provide documentation and details about the actions taken [or not]" in response to those 2006 findings.</p>
<p>In other words, one possible cause of at least some of the failures documented by the DHS OIG Red Teams on baggage screening (last fall) and passenger checkpoint screening (this spring) is that some of the expensive body scanners and EDS machines may not be working properly&mdash;and the screeners operating them have no way to know this.</p>
<p>Another probable cause, of course, is that managing checkpoints and EDS machines hour after hour, day after day, is incredibly boring, especially when screeners virtually never catch anyone with malicious intent, which might keep their interest level high. DHS Inspector General John Roth told the House Oversight and Government Reform Committee on May 15<sup>th</sup> that screeners "spend long hours performing tedious tasks that require constant vigilance," but his Red Teams "repeatedly found that human error&mdash;often a simple failure to follow protocol&mdash;poses significant vulnerabilities." Long-time TSA critic Rep. John Mica (R, FL) said, "This [Red Team] report is an indictment of the failure of the TSA. Not just in one area, but in almost every area of their functions." Though invited, TSA did not send a witness to that hearing.</p>
<p>Thanks to the diligent work of GAO and the DHS Inspector General, we know there are serious management failures at TSA. Recommendations get made, especially after bursts of negative publicity, but nothing much seems to change. This looks to me like a classic example of low-performance bureaucracy at work, gradually expanding its functions (scope creep) while failing to be accountable for results. It also reflects the conflict built into TSA from the outset: it is both the aviation security regulator and the provider of a large portion of airport security services.</p>
<p>A long-proven remedy for this kind of government failure is competitive contracting. When a properly qualified company is selected to perform certain tasks, if it fails to perform adequately, the ultimate remedy is to cancel the contract. Airports already have the right, by the terms of the 2001 Aviation &amp; Transportation Security Act that created TSA, to opt out of TSA-provided passenger and baggage screening, replacing it with TSA-approved security contractors. But until now, fewer than two dozen airports have done so.</p>
<p>In their classified briefings on these TSA baggage and checkpoint screening failures, the relevant congressional committees should find out if any of the Red Team tests included airports with contract screening under TSA's Screening Partnership Program. Screening companies with dangerously poor performance should have their contracts cancelled&mdash;but we can't cancel TSA as the dominant screening operator. Only Congress can do that, by changing the law to remove the agency from screening operations, thereby ending its failure to self-regulate those operations.</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong><a name="b"></a>Good News and Bad News on Airport Capacity</strong></p>
<p>Early this year the FAA issued its third major report on airport capacity needs, under its ongoing Future Airport Capacity Task; hence the report is known as FACT3. These reports are a joint effort of several offices within FAA and MITRE Corporation's Center for Advanced Aviation System Development (CAASD). FACT1 was released in 2004 and FACT2 in 2007.</p>
<p>FACT1 presented a pretty bleak projection. Though finding only five capacity constrained airports as of 2004, large numbers were projected to reach that state by 2013 and 41 by 2020&mdash;although some of those would escape that fate in each case if all proposed improvements actually got implemented. When FACT2 appeared in 2007, the picture for 2025 was somewhat better, with 16 airports showing up as unconstrained, and about half the rest potentially unconstrained if all proposed improvements got done. But that was before the Great Recession.</p>
<p>The new FACT3 reflects a reset in projected growth of flight operations, taking into account the years of stagnation and then a resumed uptrend at a lower growth rate, as well as the gradual upsizing of airline fleets (e.g., replacement of 50-seat regional jets by larger RJs and some narrow-body planes) and the concentration of the legacy carriers into fewer major hubs. FACT3 now focuses just on 30 core airports, rather than the 40+ in previous versions.</p>
<p>The good news is that since 2000 U.S. airports have added 18 new runways and extended seven others, all at busy hub airports. Taking these improvements into account, FACT3 projects only 5 or 6 capacity-constrained airports by 2020, with another 7 possible by 2030. There is hope for long-congested Philadelphia International, if its new parallel runway project gets built, and Fort Lauderdale looks much-improved due to last year's opening of its greatly expanded south runway. Chicago O'Hare also looks promising, if the remainder of its runway improvements are completed.</p>
<p>The not so good news is potential capacity constraint at Atlanta, Charlotte, and Houston, though all three are studying additional runways. The most serious cases in 2030 are the perennial problems of JFK, LaGuardia, and Newark, plus San Francisco. The Port Authority of New York &amp; New Jersey is at least studying the possibility of runway additions&mdash;for a long time politically unthinkable, but addressed seriously in a major study several years ago by the well-respected Regional Plan Association. SFO, however, after the resounding defeat last decade of a proposed runway expansion into the Bay, seems resigned to making do with its existing runways, with some throughput increases due to various <span class="SpellE">NextGen</span> technologies.</p>
<p>And here is where the FACT3 report could have exerted more leadership, of the kind it does in championing the addition of more runways. For cases like SFO and probably LGA, where the likelihood of actually laying down more concrete is very small, the best way to deal with demand well in excess of capacity is runway pricing. And for cases like EWR and JFK, where any runway additions would be very expensive, runway pricing could generate significant new revenue streams to help pay debt service on new revenue bonds for that purpose. The economists at FAA and DOT know this, but their knowledge still has not made its way into any of these reports. FACT3 does contain a brief mention (without explanation) of "demand management" in its discussion of cases like LGA and SFO (p. 24). Perhaps that is progress, but it's pretty small beer.</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong>PFC Battle Gets More Interesting</strong></p>
<p>As Congress gears up for this year's FAA reauthorization bill, the perennial battle over passenger facility charges (PFCs) looked like it would be the same-old <span class="SpellE">same-old</span>: airlines saying "Hell, no" to any increase and airport groups calling for a large increase in the federal cap on these local user charges for airport improvements. But that's not the way it's shaping up.</p>
<p>To begin with, the airlines' historic portrayal of any increase in the PFC cap as a "large federal tax increase" no longer carries much weight with conservative groups. Thus far, only Grover <span class="SpellE">Norquist's</span> Americans for Tax Reform is taking this position. Supporting PFCs as a local user charge are <span class="SpellE">Breitbart.com's</span> Rich Tucker, the Competitive Enterprise Institute (CEI), Heritage Foundation's Town Hall, and the Tax Foundation. The latter's May 11<sup>th</sup> news release cited its new study criticizing the federal AIP grant program and arguing that locally determined PFCs are a better way to pay for airport improvements.</p>
<p>From the other end of the political spectrum, just this week a union representing about 30,000 airport employees, UNITE HERE, launched its Campaign for On-Time Flights urging airline passengers to support increased airport investment via increased airport-specific <span class="SpellE">PFCs.</span></p>
<p>Also this week came a detailed proposal from the U.S. Travel Association calling for major changes in U.S. aviation infrastructure funding. Scrapped would be five existing aviation taxes:</p>
<ul type="disc">
<li>Domestic ticket tax</li>
<li>International arrivals and departure tax</li>
<li>Domestic commercial fuel tax</li>
<li>The tax on frequent flyer awards</li>
<li>The tax on flights between the lower 48 states and Alaska or Hawaii.</li>
</ul>
<p>In exchange, the ATC system would be shifted to fees and charges, as in just about every other country in the world. Large airports would no longer be eligible for AIP entitlement grants. And the PFC cap would be increased to $8.50 and thereafter adjusted for inflation each year.</p>
<p>Those changes are broadly consistent with a white paper released last month by consulting firm ICF, the second in a series of three dealing with FAA reauthorization. "Previous ticket taxes, including the excise tax, international arrivals tax, cargo tax, and fuel tax, would all go away as payment for air traffic becomes a B2B transaction. Customers, including the airlines, would gain a seat at the governing table for a new air traffic organization, enabling them to help in defining the requirements for a new air traffic system and craft equitable ways to pay for the services." It specifically calls for a trade-off of an increased PFC as an offset to lower AIP funding, within this overall context. It also suggested that the current $4.00 segment fee be retained as sufficient to pay for a recalibrated AIP, and suggests that at $5.00 this fee could also cover FAA's safety regulatory programs, if continued general fund support for them appears uncertain.</p>
<p>Have these proposals affected the positions of airports and airlines? In a release dated May 18<sup>th</sup>, the AAAE/ACI-NA coalition called Airports United acknowledged that a debate over fundamental FAA reform is "beginning in earnest," and noted that the leaders of these two associations sent a letter to Capitol Hill in April asking that any ATC reform package include the following:</p>
<ul type="disc">
<li>An airports trust fund dedicated exclusively to funding airport improvements;</li>
<li>A system of "aviation taxes and/or segment fees to support the trust fund";</li>
<li>Enough trust fund revenue to support AIP funding at FY 2015 levels or higher; and,</li>
<li>Continued AIP eligibility for airports of all size.</li>
</ul>
<p>Needless to say, Airports United continues to advocate an $8.50 PFC cap.</p>
<p>What about the airlines? Last year it had appeared that the Airlines for America (A4A) advocacy of separating the Air Traffic Organization from FAA and making it self-supporting from ATC fees and charges was conditioned on abolishing all existing federal aviation excise taxes&mdash;which would have left AIP funding in question. That turns out to be incorrect. What A4A actually favors is that the total amount paid by airlines in ATC fees plus any remaining aviation taxes (e.g., for AIP) be no higher than what airlines today pay via the whole array of current aviation excise taxes. A recent analysis prepared for A4A by an outside consultant used FY 2014 budget numbers and assumed ATC user fees for the new, self-supporting ATO, <em>user taxes</em> for a portion of AIP, and general fund support for FAA safety and miscellaneous functions and the remainder of AIP.</p>
<p>While the above airport and airline positions are not the same, to me they suggest room for serious discussion and horse-trading, since both stakeholder groups have a real interest in preventing aviation infrastructure investment from being held hostage to ongoing federal budget crises.</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong>Perimeter Security Still Getting Short Shrift</strong></p>
<p>Since 2004, there have been at least 268 breaches of airport perimeters&mdash;move than two dozen per year&mdash;according to an investigation by Associated Press that was released in April. AP compiled the information from the 30 busiest U.S. airports via public records requests, news archives, and interviews. Their findings include:</p>
<ul type="disc">
<li>Of the 268 breaches, at least 44 times the intruders got as far as runways, taxiways, or gate areas, and in five case actually boarded an airliner.</li>
<li>Just seven of the 30 airports accounted for more than half the breaches&mdash;San Francisco (37), Philadelphia, Los Angeles, Las Vegas, San Jose, Miami, and Tampa.</li>
<li>There were more than 30 breaches in each of 2007, 2012, 2013, and 2014.</li>
<li>Few airports would disclose how long it took to catch the intruder&mdash;and some were never apprehended.</li>
</ul>
<p>It turns out that although airports are required to report perimeter breaches to TSA, the Government Accountability Office found, in a 2009 report, that not all such incidents are reported. A 2011 TSA report that AP says was shared with a congressional committee reported 1,388 perimeter breaches during the 10 years between 2001 and 2010&mdash;an average of 139 per year&mdash;more than five times the rate AP was able to identify in its research.</p>
<p>None of the incidents tracked by AP&mdash;and none that have been publicly reported&mdash;involve anyone with sabotage or terrorism intent. But the relatively large number of perimeter breaches suggests that such persons would stand a chance of getting to aircraft or terminals through this back door approach, rather than going through the front door, via passenger checkpoints where TSA has concentrated the vast bulk of its capital and operating costs.</p>
<p>It's not clear whether beefing up perimeter security would be cost-effective. Estimates are that since 9/11, U.S. airports have spent hundreds of millions of dollars on improved fencing, video surveillance, and staffed entry gates. No U.S. airport has anything approaching the perimeter security of Israel's Ben <span class="SpellE">Gurion</span> Airport&mdash;but none faces anything like the war-zone security threats faced by Israel.</p>
<p>But the relative neglect of perimeter security, like the relative neglect of airport employee security, reflects the fragmented approach to airport security fostered by creation of the TSA as the nation's aviation security regulator <em>and</em> screening operator. In most European countries, all of airport security is the responsibility of the airport, under regulatory oversight from the national government. That makes for a more-integrated approach, with a single point of responsibility for all aspects of security&mdash;screening, access control, lobby areas, parking, and airfield perimeter. Shifting to that approach requires a fundamental rethinking of TSA's role.</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong>Does Airport Privatization Have a U.S. Future?</strong></p>
<p>The 2015 edition of Reason Foundation's <em>Annual Privatization Report</em> includes a chapter on aviation infrastructure, reviewing global and U.S. developments in privatization, corporatization, and public-private partnerships during 2014. It covers airport privatization trends, air traffic control corporatization, and outsourced airport security operations. (<a href="http://reason.org/news/show/apr-2015-air-transportation">http://reason.org/news/show/apr-2015-air-transportation</a>)</p>
<p>In compiling the section on airport privatization, I am always struck by the huge disparity between the major, ongoing trend of airport privatization and public-private partnerships (P3s) in Europe, Asia, and Latin America and the dearth of privatization in this country. For example, in a table of the world's largest (by revenue) airport groups compiled by <em>Airline Business</em>, the 40 of those that are privatized (in whole or in part) account for 50.5% of the revenue of the entire top 100. A question I get fairly often is why this global trend has gotten so little traction in the United States.</p>
<p>That question was put to the Government Accountability Office last year, and GAO's answer was released in November 2014: "Airport Privatization: Limited Interest Despite FAA's Pilot Program" (GAO-15-42). I was one of 42 aviation stakeholders and subject-matter experts interviewed by the GAO team, and I think the report does a pretty good job of answering the question. Although there have been 10 applications to the FAA pilot program over the years, only two resulted in actual privatizations: Stewart Airport in New York and San Juan International in Puerto Rico. Only one application is currently pending: <span class="SpellE">Airglades</span> Airport in Florida.</p>
<p>One reason for privatization's greater appeal overseas is that hardly any other countries provide for tax-exempt bonds to be issued for infrastructure by public-sector entities. So airports seeking to finance large-scale capital investments (runways, terminals, etc.) have to do so at taxable bond rates&mdash;so shifting to a private finance approach does not carry a big interest-rate penalty. (Equity investment, though, does require a higher return, but the potential benefit is more efficient and businesslike management in exchange for that higher return.) Related to this, under current U.S. tax law it is difficult or impossible for a public-sector airport's existing tax-exempt bonds to be taken over by a for-profit airport company. Hence, the need to <span class="SpellE">defease</span> or pay off existing bonds adds another complication to a U.S. airport privatization.</p>
<p>Another difference, not mentioned by GAO, is that many developed-country airports have long-since been corporatized, so in those cases the transition to investor ownership is not as drastic as such a change would be here. For example, if you look at the financial statements of a corporatized airport in Europe (e.g., Amsterdam Schiphol), you will see that it pays ordinary corporate income taxes like any other business, and in some countries a corporatized airport may also pay property taxes like other businesses. When such an airport is privatized, those tax costs would continue, rather than being a drastic new expense, as would be the case here (though in the proposed privatization of Chicago Midway, the City of Chicago got legislation enacted to exempt the airport from property taxes if the privatization went through).</p>
<p>A third difference, also not explained in the GAO report, is that many U.S. airports still operate under residual-cost agreements with their principal airlines (anchor tenants). Under those agreements, airline fees and charges are adjusted every year so as to cover only the residual costs of operating the airport&mdash;after taking into account all non-airline revenue. In exchange, those anchor tenants generally get veto power over airport expansions that would allow significant entry by competitors. By contrast, corporatized and privatized airports use "compensatory" agreements with airlines, in which the latter pay negotiated rates for landing, parking, and space rental irrespective of the amount of non-airline revenue. What has changed in recent decades is airline realization that under a residual-cost agreement, it is difficult to forecast the airline's future airport costs. That factor appeared to have played a significant role in airlines' agreement to both the Midway and San Juan privatization deals, enabling predictable future airport costs for several decades into the future.</p>
<p>GAO reviews several examples of P3 arrangements, such as the one just agreed to for the replacement of LaGuardia's central terminal, the P3 deal that led to the privately developed airport in Branson, MO, and the recent P3 arrangements to manage and make improvements to the airport at Gary, IN. None of these required the government airport owner to take part in the FAA pilot program, since none involved net airport revenue going off the airport.</p>
<p>The final portion of the GAO report summarizes stakeholder views on lessons learned from airport privatization and the FAA pilot program. To make the pilot program more attractive&mdash;both to investors and to current airport owners&mdash;the following were suggested:</p>
<ul type="disc">
<li>Ensure that the current airport owner conducts thorough due diligence before embarking on privatization;</li>
<li>Create a transparent privatization process;</li>
<li>Involve all stakeholders in the privatization process;</li>
<li>Reduce or eliminate the airline veto power over privatization agreements;</li>
<li>Reduce uncertainty and clarify the federal rules;</li>
<li>Reduce complex federal requirements to get to approval via the pilot program&mdash;e.g., making it automatic that previous federal grant funds do not have to be returned to the Treasury in the event of privatization (which now requires a waiver).</li>
</ul>
<p>Those suggestions make sense to me. Streamlining the pilot program to make it more attractive and easier to use would be wise, because the demand for it may well increase in coming years. That could come about as numerous city and state governments face enormous pressures to reduce massive unfunded liabilities in their employee pension systems. Selling or long-term leasing of assets like airports could be an important part of addressing this need.</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong>Refine <span class="SpellE">PreCheck</span>, Says Bipartisan House Bill</strong></p>
<p>In the previous issue of this newsletter, I wrote about TSA's poorly justified checkpoint programs called "Managed Inclusion" and "Automated Risk Assessment," under which passengers who have not been vetted as <span class="SpellE">PreCheck</span> members or one of several Customs &amp; Border Protection trusted traveler programs (e.g., Global Entry) are judged on-the-spot by TSA screeners to be low-risk enough to be shifted into <span class="SpellE">PreCheck</span> lanes. I urged that Congress ban such risky practices.</p>
<p>So I'm pleased to report that a bipartisan bill has been introduced in the House to do just that. The Securing Expedited Screening Act (HR 2127) was introduced by Rep. John <span class="SpellE">Katko</span> (R, NY), Rep. Bennie Thompson (D, MS), and Rep. Kathleen Rice (D, NY) in late April. <span class="SpellE">Katko</span> chairs the House Homeland Security subcommittee on Transportation Security, on which Rice also serves. Thompson is the ranking Democrat on the full Homeland Security Committee.</p>
<p>The bill would restrict expedited screening in <span class="SpellE">PreCheck</span> lanes to members of <span class="SpellE">PreCheck</span> and the other CBP trusted traveler programs, plus members of the military and several other groups defined by TSA as generically low-risk. It also provides that if TSA wants to extend expedited screening to any other groups, it would have to first submit a validated, third-party assessment to Congress.</p>
<p>In a statement supporting the bill, Thompson reiterated his support for <span class="SpellE">PreCheck</span> but made clear that "I do not have confidence that TSA's use of random, case-by-case, on-site security risk assessments to identify passengers for expedited screening is keeping us secure." Neither do I, which is why I'm glad to see this legislation introduced and hope for its speedy enactment.</p>
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<p><a name="article-196984"></a><strong>News Notes</strong></p>
<p><span style="text-decoration: underline;">Port Authority Announces LaGuardia PPP Winner</span>. On May 28<sup>th</sup>, the Port Authority of New York &amp; New Jersey announced that the consortium called LaGuardia Gateway Partners has been selected as the developer/operator of the $3.6 billion replacement for LGA's aging Central Terminal. The consortium is led by Vantage Airport Group, Skanska, and <span class="SpellE">Meridiam</span>, each of which will invest equity in the project, with HOK and Parsons Brinckerhoff as lead designers and Skanska and Walsh Construction as the contractors. LGA Gateway Partners will invest more than $2 billion in the terminal itself, with the Port Authority investing more than another billion in new parking facilities and supporting infrastructure.</p>
<p><span style="text-decoration: underline;">NASA Privatizes Moffett Field</span>. On April 1<sup>st</sup>, Google took over operational control of historic Moffett Field in Silicon Valley, under a $1.16 billion 60-year lease with NASA. The company has agreed to restore three huge but deteriorating airship hangars, which it will use for testing of unmanned aerial vehicles (UAVs), high-altitude balloons, and various experimental craft. To operate the two-runway airfield itself, Google has hired <span class="SpellE">AvPORTS</span>, which operates and manages a number of smaller airports under contract.</p>
<p><span style="text-decoration: underline;">Toronto Building Airport Express Train</span>. The Province of Ontario is developing the Union-Pearson Express, a fast passenger train linking downtown's Union Station with Pearson International Airport. The standard one-way fare has been announced as C$27.50, which has led to predictable complaints about the train being only for the wealthy. But there is a considerable value proposition in this new alternative. The Express will make the trip, with just two intermediate stops, in 25 minutes, compared with more than an hour via the existing transit system (two trains plus a shuttle bus) at a fare of just C$3.00. Pre-booked cab/limo fare is C$48, and flat-rate cab is C$55. Moreover, holders of the local Presto multi-system transit card, can use the Express for just C$19.</p>
<p><span style="text-decoration: underline;">Greece Will Implement Airport Privatization Agreement</span>. Despite previous populist objections by its new leftist government, Greece announced on May 5<sup>th</sup> that it will go ahead with the previously agreed privatization of regional airports. Under the agreement negotiated last year, winning bidder <span class="SpellE">Fraport</span> will pay $1.3 billion to operate, improve, and manage the airports for 40 years. The settlement was part of bail-out negotiations between European agencies and the nearly bankrupt Greek government.</p>
<p><span style="text-decoration: underline;">Third Frankfurt Terminal Gets Green Light</span>. <span class="SpellE">Fraport</span> will add a third terminal to its Frankfurt International Airport, after having won final government approval for the $3.2 billion project. Its projections show that current facilities will reach their maximum annual passenger capacity of 64 million within the next few years, and could reach 68-73 million by 2021. The first phase of Terminal 3 will add capacity for 14 million annual passengers. In 2014 the airport handled 59.6 million.</p>
<p><span style="text-decoration: underline;">San Diego/Tijuana Airport Link by Year-End</span>. The long-planned cross-border pedestrian bridge linking San Diego County to the Tijuana International Airport should be completed by the end of 2015, according to developer <span class="SpellE">Otay</span> Tijuana Joint Venture. The Cross Border Xpress is aimed at making things easier for the two million U.S. air travelers a year who already use the Tijuana airport as an alternative to San Diego International. Those passengers currently must cope with unpredictable delays at vehicular border crossings in order to use Tijuana International. Cross Border Xpress will include its own parking facilities on the U.S side. The company aims to recover its investment via a toll to walk across the bridge, as well as by offering retail and duty-free shopping. Its costs include the facilities for U.S. Customs &amp; Border Protection's operations in connection with the border crossing.</p>
<p><span style="text-decoration: underline;">Lyon and Nice Are Next French Airports to Be Privatized</span>. Assuming pending legislation is enacted by the French parliament, the next two airports to be privatized will be Lyon and Nice. French infrastructure developer/operator Vinci has already announced that it plans to bid for these airports, according to an April 20<sup>th</sup> Reuters story. Vinci is building a global airports portfolio, in addition to its 8% stake in <span class="SpellE">Aeroports</span> de Paris.</p>
<p><span style="text-decoration: underline;">Air Canada Joins <span class="SpellE">PreCheck</span></span><em>. Travel Weekly</em> last month reported that <span class="SpellE">PreCheck</span> members heading to Canada from the United States on Air Canada will be able to use <span class="SpellE">PreCheck</span> lanes at any of the 52 U.S. airports served by the airline. Air Canada is the first non-U.S. airline qualified for <span class="SpellE">PreCheck</span>.</p>
<p><span style="text-decoration: underline;">Hong Kong to Get Third Runway</span>. The Airport Authority of Hong Kong has received approval to proceed with its planned $18 billion expansion project, adding a third runway on 1,600 acres of reclaimed land and adding taxiway and an expansion of Terminal 2. The financing plan includes bank loans and bonds, as well as the airport's operating surplus. Debt service will come primarily from increased passenger charges. About 70% of HKIA's passengers are non-residents, which gives the users-pay concept a fairness advantage over local tax support. After detailed design, construction is planned to begin in 2016, with completion by 2023.</p>
<p><span class="SpellE"><span style="text-decoration: underline;">Navi</span></span><span style="text-decoration: underline;"> Mumbai Airport Has Four Bidders</span>. The long-awaited new airport for Mumbai has begun pre-development work, and the City and Industrial Development Corporation of Maharashtra (CIDCO) has announced the names of four pre-qualified bidders for what is expected to be a $2.3 billion P3 project. Financial bids are due in August, with final selection in October.</p>
<p><span style="text-decoration: underline;">CAPA Report on LaGuardia Airport</span>. The CAPA Centre for Aviation has released a thoughtful analysis of the problems and future of LGA and the other New York airports, inspired in part by a recent op-ed piece calling for the airport to be torn down and its flight activity (unrealistically) transferred to JFK and Newark. After describing the limitations of these airports, CAPA suggests looking at the former BAA shared monopoly of the London airports (Heathrow, Gatwick, and Stansted) as a model. Instead of remaining a shared monopoly, those airports have been privatized and must now compete with one another. The report, "New York LaGuardia Airport&mdash;Rehabilitate or Close Down? Is <span class="SpellE">Privatisation</span> a More Useful Option?" is available on the organization's website: <a href="http://centreforaviation.com">http://centreforaviation.com</a>.</p>
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<p><strong>Quotable Quotes</strong></p>
<p>"American aviation's last line of defense is quickly evaporating. Disgruntled federal air marshals, according to <em>National Review</em>, are leaving the service at an alarming clip&mdash;in 2014, an average of 10 agents were reported to have left the service's Washington, DC office every month. It seems only a matter of time until the U.S. government will be forced to consider a major overhaul of one of its biggest post-Sept. 11 security upgrades. That could be a good thing, but only if Washington is willing to entirely rethink the program. There's little reason to believe that a Federal Air Marshal Service&mdash;which is currently thought to have around 3,500 officers&mdash;was ever the best way to protect the more than 26,000 commercial flights that take off in the United States, on average, every day. America's planes can be made far safer, far more efficiently."<br /> &mdash;Adam Minter, "Stand Down, Sky Police," <em>Bloomberg View</em>, March 16, 2015</p>
<p>"This is a pretty complicated governance system for an enterprise operation. An efficient, facile (important in a quickly changing world) business operation wants to be streamlined. With City Council, a mayor, a Board of Airport Commissioners, a Chief Administrative Officer, and a Controller's Office all needing to be involved in various parts of the business, one could certainly say the process of making decisions is anything but streamlined. . . . In order to have a competitive airport that is running like an enterprise, you've got to manage it like a business. . . . the body politic needs to lean forward to support what is going to make that enterprise thrive. That is not necessarily what we have in the City of Los Angeles. For a long time, the city government had dealt with the Department of Airports as just any other city department. That's why it languished and was so far behind other competitive airports in the nation. . . . There are certainly other city-run airports like Chicago, Miami, and Atlanta. But they are not typically the airports regularly populating the top slots of 'The Best of Airports' lists. I think the real problem here was that the airport has been a political pawn for decades. That essentially put the airport development in suspended animation for decades. Operational skill diminished, and staff fell into a catatonic state, afraid to do anything while waiting for their leaders to determine what their forward development direction was going to be."<br /> &mdash;Gina Marie Lindsey, "Outgoing LAWA Executive Director Lindsey Assesses Tenure &amp; Challenges," <em>Metro Investment Report</em>, Jan./Feb. 2015</p>
<p>"We found that some airports were not profitable in the long term, some were underused, and some were not used at all. European air traffic is set to double by 2030. If Europe is going to meet this extra demand, both the [European] Commission and the member states must improve the way they invest in our airports by funding only those which are profitable and for which there is a real investment need."<br /> &mdash;George <span class="SpellE">Pufan</span>, European Court of Auditors, in Cathy <span class="SpellE">Buyck</span>, "EU-Funded Airports Are Not Value for Money, Auditors Say," <em>Aviation Daily</em>, Dec. 17, 2014</p>
<p><a href="#top">&raquo; return to top</a></p>1014272@http://www.reason.orgThu, 04 Jun 2015 08:23:00 EDTbob.poole@reason.org (Robert Poole)Privatization of Airports, Air Traffic Control and Airport Securityhttp://www.reason.org/news/show/apr-2015-air-transportation
Annual Privatization Report 2015 <p>The&nbsp;<em>Air Transportation</em>&nbsp;section of Reason Foundation's&nbsp;<a href="http://reason.org/news/show/annual-privatization-report-2015"><em>Annual Privatization Report 2015</em></a>&nbsp;provides an overview of the latest on privatization and public-private partnerships in air transportation. Subsections include:</p>
<p style="padding-left: 30px;">A. Airport Privatization</p>
<p style="padding-left: 30px;">B. U.S. Airport Security</p>
<p style="padding-left: 30px;">C. Air Traffic Control</p>
<p>&raquo; <a href="http://reason.org/files/apr-2015-air-transportation.pdf"><strong><em>Annual Privatization Report 2015: Air Transportation</em></strong></a> [pdf, 1.5 MB]</p>
<p>&raquo; Complete <a href="http://reason.org/news/show/annual-privatization-report-2015"><strong><em>Annual Privatization Report 2015</em></strong></a></p>1014239@http://www.reason.orgThu, 14 May 2015 09:00:00 EDTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #105http://www.reason.org/news/show/airport-policy-security-news-105
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">Airport funding if ATC is corporatized</a></li>
<li><a href="#b">Fixing the flaws in <span class="SpellE">PreCheck</span></a></li>
<li><a href="#c">Atlanta highlights employee security shortcomings</a></li>
<li><a href="#d">Central planning and LaGuardia Airport</a></li>
<li><a href="#e">All-you-can-fly business models</a></li>
<li><a href="#f">News Notes</a></li>
<li><a href="#g">Quotable Quotes</a></li>
</ul>
<p><strong><a name="a"></a>Funding Airport Investment in a Transformed FAA</strong></p>
<p>The endless battle between U.S. airports and U.S. airlines over how to pay for airport capital improvements is under way again, because Congress has begun work on the bill to reauthorize the FAA, whose current authorization expires Sept. 30<sup>th</sup>. However, the two interest groups seem to be arguing with each other as if these were normal times in federal aviation policy. Memo to Airlines for America (A4A) and airport groups AAAE/ACI-NA: <em>normal times these are not</em>.</p>
<p>The sequester in 2013 delivered an earthquake-like shock to aviation stakeholders. Controllers found themselves experiencing furloughs, AAAE saw its contract towers nearly shut down, and airlines experienced increased delays due to the ATC furloughs. Airports suffered again when Congress decided to force FAA to un-do the furloughs and rescue the contract towers by shifting funds out of the airport grants program (AIP) to beef up ATC operations. Meanwhile, FAA's capital spending is a full $1 billion a year less than the agency had projected five years ago. And as a result of that, the <span class="SpellE">NextGen</span> Advisory Committee came up with a series of <em>triage</em> recommendations (which FAA accepted) to ensure that at least a few high-priority near-term <span class="SpellE">NextGen</span> projects can be funded.</p>
<p>Those events led the 2011-2013 FAA Management Advisory Council to recommend, unanimously in its final report of January 2014, that U.S. aviation policy needs a fundamental overhaul. The aviation excise taxes are poorly linked to the factors driving aviation's growth, the system is far too politicized, and the ATC system needs to be surgically removed from the FAA bureaucracy and allowed to function like a real high-tech service business. Indeed, the MAC pointed to the global success of ATC corporatization, with these transformed air navigation service providers becoming self-supporting via direct fees and charges, insulated from their governments' budget problems, and able to finance capital modernization via revenue bonds, just like airports do.</p>
<p>Most aviation stakeholder groups accept most or all of this diagnosis and prescription, yet the battle over airport funding has gotten under way as if this larger context didn't exist. A4A cites its taxpayer survey saying 82% <em>oppose</em> an increase in the cap on passenger facility charges (PFCs), while the U.S. Travel Association cites its survey of air travelers finding up to 79% <em>favor</em> a $4 per trip increase in order to make airports better. <span class="GramE">And back and forth the argument rages.</span></p>
<p>What makes this battle all the more frustrating is that A4A strongly supports taking the Air Traffic Organization out of FAA, giving it a federal charter as a nonprofit, user-funded and stakeholder governed company&mdash;and abolishing all existing federal aviation taxes as part of the deal. The revenue from those taxes&mdash;$12.85 billion in FY 2013&mdash;is more than enough to cover the full capital and operating cost of what some are calling <span class="SpellE">NewATO</span>, estimated by a recent study as $11.25 billion (prior to future cost savings). But that total tax take is not enough to pay for both ATO and the $3.3 billion airport grants program (AIP). So if the ATO is separated from FAA as a self-funded nonprofit, and <em>all</em> the excise taxes are abolished, FAA would still need a budget (using FY 2013 <span class="SpellE">numbers</span> again) of $5.4 billion&mdash;$2.1 billion for safety regulation and administration and $3.3 billion for AIP grants. Where is that money supposed to come from?</p>
<p>In recent years (between 2001 and 2013), the general fund has provided an average of 22.6% of FAA's budget. Since 2013, because of a surplus in the Aviation Trust Fund, that percentage has dropped below 10%, but that's a historical aberration. FAA safety regulation and administration, at $2.1 billion, is inherently governmental, and like all the other federal safety regulatory agencies, ought to be paid for by the general fund. That still leaves a $3.3 billion AIP program (or whatever size Congress decides is warranted). What are the options for funding that?</p>
<p>Assuming that ATC corporatization is part of the "transformational" reauthorization bill that House Transportation &amp; Infrastructure Committee chair Bill Shuster (R, PA) has promised, and which A4A strongly supports, one option would be to retain (or recreate) some portion of the existing aviation excise taxes as an AIP tax that could be handled via a new AIP Trust Fund. Some have suggested a version of the existing segment fee, sized to generate $3.3 billion a year, as the single source of revenue for this new trust fund. If that seems like too large a hit for the airlines, there continues to be a willingness of large hub airports to consider giving up most or <span class="GramE">all of their</span> AIP grant funding in exchange for an increase in the PFC cap.</p>
<p>This is a problem that the <em>airports and airlines</em> must come to grips with. Former American Airlines CEO Bob Crandall laid it on the line this week in a hard-hitting Viewpoint piece in <em>Aviation Week</em>. "We need to take the ATO out of the FAA and create a self-supporting corporate entity to perform the ATC function," he wrote. But airports and airlines need to bite the bullet and work out a deal to ensure ongoing airport investment, he said, via some combination of an aviation excise tax and increased <span class="SpellE">PFCs.</span> As Crandall put it in the title of his piece, "Don't blow our shot at FAA financing reform." I heartily agree.</p>
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<p><strong><a name="b"></a>Fixing <span class="SpellE">PreCheck's</span> Flaws</strong></p>
<p>There is good news and bad news about TSA's popular <span class="SpellE">PreCheck</span> program that lets low-risk passengers use special screening lanes and expedited security. The good news is that TSA has now enrolled a million people in the program, giving them low-hassle screening and easing the congestion in the regular screening lanes. It has also announced that people who previously "joined" <span class="SpellE">PreCheck</span> via their airline frequent flyer program (i.e., without enrolling, paying the $85 fee, and getting a background check) will not be getting access to <span class="SpellE">PreCheck</span> lanes as often as they used to, unless they are also a participant in one of DHS's trusted traveler programs (Global Entry, NEXUS, or SENTRI), which are open to anyone who can pay the membership fee and pass the background check.</p>
<p>The bad news is that TSA's two programs that allow <em>non-enrolled</em> air travelers to use the lanes seemingly at random have produced their first known failure. As the DHS Office of Inspector General reported last month, a convicted felon who was formerly a member of a domestic terror organization (Sara Jane Olson) was allowed to use a <span class="SpellE">PreCheck</span> lane at Minneapolis/St. Paul Airport. The screener recognized Olson, but a supervisor over-ruled his judgement that she was not low-risk.</p>
<p>That fiasco led to a March 25<sup>th</sup> hearing by the transportation security subcommittee of the House Homeland Security Committee. Subcommittee members from both parties were positive about <span class="SpellE">PreCheck</span> as a program for people who enroll after receiving a TSA background check, but they were highly critical of the two programs TSA has concocted to let large numbers of non-members use the <span class="SpellE">PreCheck</span> lanes: "Managed Inclusion" and "Automated Risk Assessment."</p>
<p>As criticized in a recent report by the Government Accountability Office (GAO), Managed Inclusion relies on TSA Behavior Detection Officers (BDOs) to pull travelers out of the lines awaiting regular screening and vet them on-the-spot as low enough risk to be shifted over to the <span class="SpellE">PreCheck</span> lane(s). The other program, Automated Risk Assessment, uses information from TSA's Secure Flight information on every passenger and about the specific flight in question to select, using a risk algorithm, a certain number of passengers who will be shifted into the <span class="SpellE">PreCheck</span> lanes. It was this latter program that enabled Sara Jane Olson to be selected for <span class="SpellE">PreCheck</span> rather than regular screening.</p>
<p>At the hearing, DHS Inspector General John Roth expressed his office's concerns that the rules for those two programs "are inadequate to ensure only low-risk populations receive <span class="SpellE">PreCheck</span> screening." He also noted that "TSA has not adopted the majority of our recommendations" regarding these programs. And Jennifer Grover, Director of Homeland Security and Justice at GAO, told the subcommittee that GAO still has concerns about Managed Inclusion, which "TSA has not yet demonstrated . . . [as] effective at providing the intended level of security."</p>
<p>Subcommittee chair Rep. John <span class="SpellE">Katko</span> (R, NY) asked TSA Chief Risk Officer Kenneth Fletcher if a much larger enrollment of <em>vetted</em> members in <span class="SpellE">PreCheck</span> would "change the calculus for wanting to use Managed Inclusion," and Fletcher readily agreed that it would, saying, "We want to dramatically expand the application program." Rep. Mike Rogers (R, AL) asked Fletcher to explain and justify Managed Inclusion and was not satisfied with his answers. Fletcher also admitted that the known felon/terrorist who was granted access to the <span class="SpellE">PreCheck</span> lane by a supervisor "would not have been accepted through the application enrollment program." And in response to <span class="SpellE">Katko's</span> pointed comment that "the Risk Assessment and Managed Inclusion approach aren't as thorough and good as doing the <span class="SpellE">PreCheck</span> background check," Fletcher replied, "Yes, I would agree with that."</p>
<p>As the hearing wound down, <span class="SpellE">Katko</span> asked Fletcher what had happened to the planned third-party enrollment program under which data security companies would set up numerous enrollment centers at convenient locations nationwide&mdash;but for which the RFP was suddenly withdrawn in February. Fletcher explained that one provision that had aroused privacy concerns should not have been included, so they withdrew the RFP to fix that. He said he is hoping the RFP will be out "soon." And he added that expanded marketing and enrollment of this kind is "our best opportunity to shut down, dial back on Managed Inclusion and Risk Assessment." And in response to a question from Rep. <span class="SpellE">Katko</span>, he also noted that algorithms now exist that would permit such companies to screen out higher-risk applicants "without having to go through the traditional fingerprint-based NCIC check."</p>
<p>This all makes good sense, but the third-party expanded enrollment program has suffered delay after delay within TSA. Congress should simply ban both Managed Inclusion and Risk Assessment as holes in the risk-based security system. That would give TSA increased motivation to get the third-party program up and running, generating plenty of additional vetted travelers to use its <span class="SpellE">PreCheck</span> lanes.</p>
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<p><strong><a name="c"></a>Atlanta Incidents Highlight Employee Security Shortcomings</strong></p>
<p>First came last December's exposure of a gun-smuggling operation under which two Delta employees at Atlanta's Hartsfield-Jackson International Airport smuggled guns onto airliners. That was followed in March by an NBC-DFW investigation that revealed that more than 1,400 airport worker security badges at Hartsfield-Jackson were missing and unaccounted for. Both incidents have led to congressional concerns, and policy changes are likely.</p>
<p>Hartsfield-Jackson general manager Miguel <span class="SpellE">Southwell</span> told a congressional hearing in January that he intended to move toward full airport-employee screening, as both Miami and Orlando did following similar employee smuggling incidents. CNN reported in February that the Atlanta airport had begun screening employee bags before letting them enter secure areas and closing off many of the 70 access points to secure areas outside the terminals. Airport spokesman Reese <span class="SpellE">McCranie</span> told CNN that this was the start of a "phased-in approach to get to full employee screening." The airport plans to get down to just 10 entry points.</p>
<p>NBC News/Chicago reported on March 18<sup>th</sup> that TSA <span class="GramE">may</span> be moving to mandate airport employee screening. It quoted TSA's acting deputy administrator, Mark Hatfield, saying that "TSA is conducting an insider threat analysis to identify potential indicators of criminality or threats to aviation that could provide insight into new training operations, or methods of screening and vetting employees." <em>Airport Business</em> (Feb./March 2015) reported that about 960,000 employees (of airlines, airports, vendors, concessionaires, etc.) have access to secure areas via about 18,000 access points at airports with TSA screening It also cited TSA estimates that it provided 257,979 hours of random employee screening nationwide last year. That sounds like a lot, but it's only 707 hours a day spread over some 450 airports&mdash;less than 2 hours per day per airport.</p>
<p>Lost or stolen security badges are another problem, since employees must display such a badge to enter secure portions of the airport known collectively as the as the secure information display area (SIDA). The SIDA badge is issued after the employee has passed an FBI criminal history background check. It includes a photo, and the employee must enter a PIN in addition to displaying the badge to pass through an entrance. Lost badges are supposed to be reported immediately, so they can be de-activated in the system, but this does not always happen. <span class="GramE">A stolen SIDA badge could be used by an intruder to walk through an open gate</span>, and once through, the intruder wearing the badge would appear to be authorized to be there.</p>
<p>When NBC-DFW did its investigation, it sent queries to large number of airports. Atlanta was the first to respond, but TSA then forbade all other airports to respond to the query. Therefore, we have no idea how common this problem of missing badges is at other airports. Sen. John Thune (R, SD) and three other senators (from both parties) sent a letter to acting TSA Administrator Melvin <span class="SpellE">Carraway</span> asking for specifics on missing badges at all TSA-served airports over the last five years.</p>
<p>Some security experts are expecting TSA to soon mandate 100% employee screening at airports, which could well be overkill. However, the benefit/cost trade-off would be a lot more favorable if such a mandate allowed other airports to follow the example of Miami and Orlando, both of which use private security companies rather than what would be a hugely expanded TSA screening workforce.</p>
<p>A second approach&mdash;either as an alternative to 100% screening or as a supplement&mdash;would be to shift the process of employee vetting from the current TSA practice of once every 5 years to "perpetual vetting," under which data vetting would take place on an ongoing basis, to discover recent events (e.g., felony convictions) that would be disqualifying were they known about as soon as they happened. That approach could supplement current random screening. But if 100% employee screening ends up being mandated, then employees who agreed to participate in perpetual vetting could bypass the regular daily employee screening, just as pre-vetted air travelers can use the <span class="SpellE">PreCheck</span> fast lane.</p>
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<p><strong><a name="d"></a>Central Planning Still Plagues LaGuardia Airport</strong></p>
<p>The long-overdue $3.6 billion replacement of LGA's <span class="GramE">antiquated,</span> "Third World" Central Terminal has been postponed yet again. Three years ago teams of companies responded to the Port Authority's Request for Information about their interest in replacing the terminal via a long-term public-private partnership. After many convoluted steps, the competition finally took place last year, leading to two finalist teams: one from Goldman Sachs, <span class="SpellE">Aeroports</span> de Paris, and Tutor Perini and the other consisting of Morgan Stanley, <span class="SpellE">Meridiam</span>, Vantage Airports, andSkanska.</p>
<p>But out of the blue last October, just before the winning bidder was to be announced, Gov. Andrew Cuomo, with Vice President Joe Biden in tow, announced an international design competition for all three New York airports. Conceptual designs were due Feb. 2<sup>nd</sup>, and Gov. Cuomo's office told the <em>Wall Street Journal</em> that it had received six submissions for LGA and four for JFK. No schedule for selecting the winners has been announced. With this going on, the Port Authority and its two Central Terminal finalists have been left cooling their heels, and at last word, the agency's tentative April deadline for announcing the terminal project winner has been abandoned.</p>
<p>As if things were not confusing enough, at the beginning of March the Port Authority announced it would begin a serious study of lifting the 1,500-mile perimeter rule it adopted in 1984, intended to reinforce its plan for Newark (EWR) and JFK to be the metro area's long-haul and international airports and LGA providing short and medium-haul service only. An earlier version of that rule, adopted when JFK (then called <span class="SpellE">Idlewild</span>) had just opened in 1948, was intended to shift all longer-haul flights from LGA to JFK.</p>
<p>This kind of central planning is common to multi-airport monopolies, but has a number of unintended, harmful consequences. First, in the huge and spread-out New York metro area of 20 million people, it deprives customers in many parts of the region of good short/medium-haul air service, unless they manage to schlep their way to far-off LGA. Second, by focusing short/medium service at LGA, the policy significantly reduces the kind of feeder flights that enable a major airport like JFK to serve as a transfer hub. A similar set of perverse consequences for decades deprived Dulles International Airport of the feeder traffic needed for a serious hub operation, due to the perimeter rule at Reagan National.</p>
<p>It's not as if LGA is incapable of serving longer routes or handling larger planes. Its two 7,000 ft. runways once served wide-bodied DC-10s, L-1011s, and B-767s. And today's long-range 737s, 757s, and A321s can and do fly transcontinental routes (e.g., from the west coast to BWI in Baltimore). It is widely believed that if the Port Authority scraps the perimeter rule, most airlines would reduce or eliminate their short-haul service at LGA in favor of long-haul routes that would be much in demand by those for whom LGA is their closest airport. But some of that short-haul service would become feeder service to airports that hub at EWR or JFK.</p>
<p>Politicization and central planning of this sort only arise when public policy supports a single political entity to control the vast majority of the airport capacity in a metro area. The alternative model is one of <em>competing airports</em>, and it's not just a libertarian's fantasy. The San Francisco Bay Area has three separately owned airports&mdash;SFO, OAK, and SJC. They compete <span class="SpellE">regionwide</span> for passengers, and provide a changing mix of short, medium, and long-haul service, depending on demand. The same holds true in the Los Angeles metro area, with LAX competing for medium/short-haul service with BUR, LGB, SNA, and ONT.</p>
<p>The former British Airports Authority once owned and operated Heathrow, Gatwick, and Stansted as a shared monopoly. And when the Margaret Thatcher government privatized BAA, it ignored the advice of several think tanks and privatized the entire BAA as a single company. It was several decades before the idea of competing airports gained credibility, and BAA was required to divest Gatwick and Stansted.</p>
<p>I feel for the Port Authority's managers, having to put up with the intervention of the Governor in what by now should be a PPP project under way rebuilding LGA's Central Terminal. And I commend them for being willing to consider scrapping the perimeter rule. Perhaps someday there will be the political will to consider divesting the three New York airports, letting each seek its optimal role based on serving its customers' demand.</p>
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<p><strong><a name="e"></a>All-You-Can-Fly Business Models Expanding</strong></p>
<p>Back in July 2013 I wrote about startup airline Surf Air, based in California. Its innovative business model was to offer members on-demand short-haul service among a limited set of California cities for a flat monthly fee, initially $1,650/month. It aimed at business travelers who can afford to fly first class on scheduled airlines but don't like the airport hassles and are not willing or able to purchase fractional ownership shares in an aircraft. Surf's initial operations use Pilatus PC-12 single-engine turboprop planes with six passenger seats.</p>
<p>The model appears to be a success, with about 1,100 paid members as of last December, and service now at Carlsbad, Hawthorne, Burbank, Santa Barbara, and San Carlos (in Silicon Valley). The Hawthorne-San Carlos route is up to three times a day each way, and the monthly membership fee is now $1,750. With venture capital raised last year, Surf Air was able to order 15 more PC-12s, plus 50 options. The company also sees significant market potential within Texas and later Florida.</p>
<p>Surf Air has also spawned a pair of spin-offs. Founder Wade <span class="SpellE">Eyerly</span> left last year, and is developing a new version called Beacon. Unlike Surf, it will provide scheduled service on an interstate basis, with initial routes encompassing Boston, New York (Westchester), East Hampton (Long Island) and Nantucket. Beacon's monthly membership fee will be $2,000, and instead of owning planes it will contract with a third party to provide and fly the planes.</p>
<p>Eyerly is also advising start-up Rise Airways in Dallas. Its initial base of operation will be Dallas Love Field, with scheduled flights to several Texas destinations from there. A February article showed the interior of a refurbished Beech King Air 350 with what appear to be six leather seats. Beacon and Rise will offer reciprocal flight benefits to members.</p>
<p>Surf, Beacon, and Rise are still tiny. But if their appeal catches on, this new business model could become as big a factor in business aviation as fractional ownership.</p>
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<p><a name="f"></a><strong>News Notes</strong></p>
<p><span class="GramE"><span style="text-decoration: underline;">Spanish Airports Valued at $9.9 Billion</span>.</span> The Spanish government held an initial public offering for 49% of the shares in state-owned airports operator AENA. Based on the prices paid for that 49%, investors valued the 46-airport company at $9.9 billion. The offering was oversubscribed 5.5 times, with most of the investors identified as infrastructure investment funds and sovereign wealth funds. <span class="GramE">The single largest stake (6.5%) was acquired by UK's Children's Investment Fund, followed by Morgan Stanley buying 3.6%</span>.</p>
<p><span style="text-decoration: underline;">Orlando Airport to Retain TSA Screening</span>. After some two years of deliberation, a special committee of the Orlando International Airport's board has recommended that MCO not outsource passenger screening via TSA's Screening Partnership Program. But it recommended that TSA meet a set of screening performance standards in order to continue being the airport's screening provider. The <span class="GramE">plan must be ratified by the full airport board</span> in order to go into effect.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Gatwick Offers Noise Compensation to Airport Neighbors on Second Runway Plan</span>.</span> The owners of London Gatwick&mdash;engaged in a struggle with London Heathrow for permission to add a new runway&mdash;have moved to shore up support from airport neighbors that would be affected by increased airport noise. It has made an offer to pay &pound;1,000 of the annual local tax bill of anyone living within the 57 dB noise threshold along the nine miles of the approach corridor of the new runway.&nbsp; The U.K. Civil Aviation Authority reports that there are 1,600 homes within that area.</p>
<p><span style="text-decoration: underline;">Seattle-Area Council Approves Second Passenger Airport</span>. On March 2<sup>nd</sup>, the Snohomish City Council approved an agreement between Propeller Airports and Paine Field under which the company would design and obtain permits for its proposed passenger terminal at the airport. Assuming the permits are granted, Propeller would sign a 30-year lease under which it would build and operate the terminal. And that, the company and the City Council majority hope, would offer residents of Seattle's northern suburbs an alternative to the long trek southward to SEA-TAC, at least for regional flights. In the past, both Alaska and Allegiant Airlines have expressed interest in serving Paine Field.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Air Canada Opposing Porter's Bid for Jets at Toronto City Airport</span>.</span> Toronto already has scheduled service from two airports, with the second being downtown's Billy Bishop Toronto City Airport, with extensive regional turboprop service from Porter Airlines. Over the past year Porter has been urging that the island airport's runway be lengthened to permit it to operate the new <span class="SpellE">CSeries</span> jets from Bombardier, now in flight testing. Porter has 12 of the planes on order. Air Canada is now lobbying against the plan, fearing competition on its longer routes that Porter could serve with jets from Billy Bishop.</p>
<p><span style="text-decoration: underline;">Peotone Airport Would Have Little Impact on ORD and MDW, Says FAA</span>. A new report from the FAA finds that if the planned South Suburban Airport at Peotone, IL is built and offers commercial air service, there would be "minimal impact" on the region's two main commercial airports' air traffic patterns. This report is the 9<sup>th</sup> of ten items that must be completed for the FAA to file its Record of Decision regarding the project. The final step is an environmental impact study. The airport project, being pursued by the Illinois DOT, is currently on hold, pending a financial review ordered by the new Governor on all proposed large infrastructure projects in the state.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Airport Privatization News in South America</span>.</span> In Chile, a consortium of <span class="SpellE">Aeroports</span> de Paris and Vinci Airports won the 20-year concession to build and operate a $700 million international terminal at Santiago's Arturo Merino Benitez Airport. Its bid offered the government 77.56% of the concession revenue from the new terminal. Paraguay has just begun the tender process for a concession to develop a new international airport for its capital city, Asuncion. It would be among the first large projects implemented under the country's new PPP law.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Airport Privatization in the Caribbean</span>.</span> The government of Jamaica has re-issued the Request for Qualifications for teams hoping to bid for the concession to modernize Norman Manley International Airport in the country's capital city, Kingston. Qualifications are due April 17<sup>th</sup>. And the St. Lucia Air and Sea Ports Authority has begun a competition for a concession to modernize and operate its <span class="SpellE">Hewanorra</span> International Airport. It hopes to finalize a concession agreement for the project by the end of August.</p>
<p><span class="GramE"><span style="text-decoration: underline;">ACLU Sues TSA Over Behavior Detection Program</span>.</span> The American Civil Liberties Union has filed a Freedom of Information lawsuit aimed at forcing TSA to divulge how it operates its behavior detection programs such as SPOT and Managed Inclusion. ACLU attorney Hugh <span class="SpellE">Handeyside</span> said that the classified nature of documents about the programs hides the <span class="GramE">fact that there is no evidence the programs are</span> effective. The agency has spent more than $1 billion on SPOT, despite serious criticisms by the GAO and the National Academy of Sciences.</p>
<p><span style="text-decoration: underline;">Alliance Airport at 25</span>. Twenty-five years ago a company run by Ross Perot, Jr. opened Fort Worth Alliance Airport, a unique public-private partnership to develop a freight logistics hub built around a cargo airport. The city of Fort Worth owns the airport, while Perot's <span class="SpellE">Hillwood</span> <span class="GramE">company</span> owns and leases out the surrounding properties. A <span class="SpellE">Hillwood</span> subsidiary, Alliance Air Services, operates and manages the airport. Today the complex includes a major intermodal rail terminal, <span class="SpellE">Fedex's</span> Southwest Regional Sort Hub, aircraft modification company GDC Technics, and numerous warehouse and distribution center facilities. There are 400 companies at Alliance, with 40,000 employees in $8 billion worth of facilities.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Greek Airport Privatization on Hold</span>.</span> The struggling Greek government has halted the planned handover of 14 regional airports to a consortium led by German airport company <span class="SpellE">Fraport</span>. Late last year <span class="SpellE">Fraport</span> was selected as the winning bidder for a 40-year concession to operate and upgrade the airports, and had committed to pay $1.5 billion for the concession, in addition to the up to $1.74 billion it planned to invest on upgrades. Although the deal has not been canceled, <span class="SpellE">Fraport</span> announced late in March that the acquisition is unlikely to be completed by the end of 2015.</p>
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<p><strong><a name="g"></a>Quotable Quotes</strong></p>
<p>"In recent years, the major commercial airport operators have made it clear that they are willing to give up AIP in exchange for higher <span class="SpellE">PFCs.</span> The airlines have objected, arguing that they prefer to pay for newer and larger facilities through higher rental charges and landing fees. The airports&mdash;and the local governments aligned with them&mdash;think the airlines are too parsimonious. Although there is no perfect answer, it seems to me that the airports have the better part of the argument. In many cases, our airports have lagged behind those in other countries, disadvantaging the U.S. in competition for visitors and imposing less than optimal travel venues on passengers. The GAO has studied the impact of higher PFCs on passenger traffic, and finds that higher charges have little impact on the volume of travel. Moreover, many international carriers, and IATA itself, believe that facility charges should be recovered directly from passengers. I think that doing a deal to swap higher PFCs for AIP&mdash;and building in provisions to give airlines some protection from airport grandiosity&mdash;would be a good deal for the airports, the airlines, airline passengers, and Mr. and Mrs. America who do not want to travel through run-down, out-of-date airport <span class="GramE">facilities.</span> . . . It's a deal I'd embrace in a heartbeat&mdash;and one I'd hope today's leaders will think seriously about."<br /> &mdash;Robert L. Crandall, Insight Lecture, Wings Club, March 26, 2015</p>
<p>"[<span class="GramE">E]<span class="SpellE">ven</span></span> if Congress were requiring airports to charge a specific PFC, it would still not be a tax; rather, it is a classic example of a user fee. Unlike taxes, user fees can only be imposed on the service beneficiaries. Taxes, in contrast, have nothing to do with the provision of specific services. The primary beneficiaries of airports are the passengers who use the airports; thus, charging them a facility user fee that will be used solely for specific, <span class="GramE">statutorily-defined</span> airport improvements cannot constitute a tax. Now, if the PFC revenues pooled by individual airports were suddenly diverted to things that don't benefit the users&mdash;e.g., paying for food stamps&mdash;Americans for Tax Reform would have a case. Yet, as I noted, permitted use of PFC funds by local airports <span class="GramE">who</span> collect it is only authorized for a narrow set of airport improvement projects. Given this reality, the faulty logic expressed in ATR's letter becomes apparent."<br /> &mdash;Marc Scribner, "Grover <span class="SpellE">Norquist</span> and Americans for Tax Reform Are Wrong about Passenger Facility Charge," Competitive Enterprise Institute news release, March 26, 2015</p>
<p>"Gov. Cuomo is introducing some Third World politics to something that's actually not hard: fixing [LaGuardia] airport. In the process, he's proving that Chris Christie isn't the only thing that ails the Port Authority, the supposedly nonpolitical agency that runs New York and New Jersey airports, the George Washington Bridge, and much <span class="GramE">else.</span> . . . After Cuomo interested himself in our 'Third World' airport last year, the Port Authority Board delayed picking a winning bid. Last week, it announced another three-month <span class="GramE">delay.</span> . . . Bottom line: Cuomo's personal championing of a new terminal is <em>delaying</em> the project. Delays aren't costless. Time means money, and not just because of inflation. And a redesign, wasting years of work, certainly means more money. The governor's meddling also makes a mockery&mdash;if it's even possible to do that&mdash;of the Port Authority's post-<span class="SpellE">Bridgegate</span> 'reform' <span class="GramE">efforts.</span> . . . We could, of course, privatize the airports&mdash;but both Cuomo and Christie need those airport profits to pay for all that dysfunction."<br /> &mdash;Nicole <span class="SpellE">Gelinas</span>, "Jamming Up LaGuardia: Andrew Cuomo's Airport Meddling," <em>New York Post</em>, Feb. 22, 2015</p>
<p>"I believe we made a big mistake in 2002 or 2003 when we set up the TSA. The Transportation Committee . . . had experts from the British, the Germans, the Israelis all come testify before the committee, and overwhelmingly they told us don't set up a federal [agency<span class="GramE">].</span> . . . [Instead], have federal regulators looking, but allow the private sector to do the work."<br /> &mdash;Chairman Bill Shuster (R, PA), "GOP Chairman: TSA Was a 'Big Mistake,'" <em>The Hill</em>, March 18, 2015</p>
<p><a href="#top">&raquo; return to top</a></p>1014214@http://www.reason.orgWed, 08 Apr 2015 23:17:00 EDTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #104http://www.reason.org/news/show/airport-policy-and-security-news-10
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">TSA PreCheck expansion controversy</a></li>
<li><a href="#b">New thinking on airport Passenger Facility Charges</a></li>
<li><a href="#c">Should airport workers be screened?</a></li>
<li><a href="#d">Slot auctions vs. runway pricing</a></li>
<li><a href="#e">Los Angeles vs. Ontario: the saga continues</a></li>
<li><a href="#f">News Notes</a></li>
<li><a href="#g">Quotable Quotes</a></li>
</ul>
<p><strong><a name="a"></a>TSA PreCheck Expansion Under Fire</strong></p>
<p>Just-retired TSA Administrator John Pistole deserves our thanks for finally implementing risk-based screening, more than a decade after Congress mandated it in the 2001 legislation creating TSA. The Aviation &amp; Transportation Security Act of 2001 called for TSA to create "trusted passenger programs . . . to expedite the screening of passengers who participate in such programs, thereby allowing security screening personnel to focus on those passengers who should be subjected to more extensive screening." After the fiasco of "Registered Traveler" under Pistole's predecessor&mdash;which required participants to be fingerprinted and iris-scanned but did not provide expedited screening&mdash;it was Pistole who pushed hard to implement genuine risk-based screening in the form of PreCheck. As of the end of 2014, PreCheck has 600 lanes in place at 124 airports, with 802,000 passengers enrolled.</p>
<p>The agency is now in procurement for one or more contractors to expand enrollment by setting up convenient enrollment centers at large workplaces, office parks, and other venues. The contractor(s) will use TSA-approved algorithms to review and assess available data about applicants, sending the lowest-risk names to TSA for the agency's decision on actually enrolling them in PreCheck.</p>
<p>Having big-data companies involved in marketing PreCheck and partially vetting applicants has aroused critics, who cite Big Brother concerns similar to those raised early in TSA's life over its proposed CAPPS II pre-screening system. That TSA project had planned to use information from commercial databases, among other things, to distinguish among high-risk, medium-risk, and low-risk travelers for purposes of airport screening. Yet the proposed third-party enrollment effort differs in two fundamental ways from the never-implemented CAPPS II. First, it is <em>voluntary</em>, applying only to those who decide to opt in, rather than to all air travelers. Second, it is not aimed at identifying potential terrorists; it is intended to identify the <em>lowest-risk</em> people among the set of those applying and to forward only those names to TSA for potential enrollment in PreCheck.</p>
<p>In addition to media critics, the Deputy Director of George Washington University's Center for Cyber and Homeland Security, Christian Becker, has just released a short report, "Risk-Based Security and the Aviation System: Operational Objectives and Policy Challenges," that criticizes the proposed private-sector vetting effort. Becker says the program will create new risks, since is likely to be "less robust than the current process in terms of authenticating applicants and vetting them from a security standpoint." He also argues that TSA has already expanded PreCheck to such an extent that "any new groups or categories of already-vetted individuals are likely to be relatively small as a share of air travelers." Both contentions are wrong.</p>
<p>To understand why, turn to the latest report on PreCheck from the Government Accountability Office: "Aviation Security: Rapid Growth in Expedited Passenger Screening Highlights Need to Plan Effective Security Assessments" (GAO-15-150). GAO documents the various lists of travelers who are now, by definition, eligible for PreCheck screening, including 2.2 million DOD military personnel, 2.5 million trusted travelers in Customs &amp; Border Protection programs such as Global Entry, and nine smaller lists, totaling 5.6 million. But the number of people in those programs who take commercial flights on any given day is small.</p>
<p>By contrast, in autumn 2013 the number of monthly passengers getting PreCheck screening exploded, from a bit over 2 million in September 2013 to more than 12 million by December 2013 (Figure 4 in the GAO report). What accounts for that huge increase is two new TSA programs to shift <em>non-enrollees</em> into PreCheck lanes: "Risk Assessment" and "Managed Inclusion." Under the former, TSA uses an algorithm to review the passengers on a specific flight, to determine "whether the passenger is low risk on a per-flight basis," whatever that means. TSA tells the airline in question to encode PreCheck eligibility on the boarding passes of those selected. (This is how some of your friends who have never signed up sometimes find the PreCheck logo on their boarding passes.)</p>
<p>Managed Inclusion is even worse. This process takes place entirely at the airport, and "is designed to provide expedited screening to passengers not deemed low-risk prior to arriving at the airport." As GAO candidly reports, it is aimed at shifting such passengers "into the expedited screening lanes to increase passenger throughput in these lanes when the volume of TSA PreCheck-eligible passengers is low." (In other words, it's a throughput program, not a security program.) TSA uses a "randomizer" to select passengers to enter a Managed Inclusion queue, where they are looked at by a Behavior Detection Officer (BDO) and possibly sniffed by a canine or swabbed for explosive traces. TSA calls this process "real time threat assessment." I call it a joke. GAO is more polite. It once again reminds us that TSA "has not demonstrated that BDOs can reliably and effectively identify high-risk passengers who may pose a threat to the U.S. aviation system."</p>
<p>Thus, far from exhausting the market for PreCheck-eligible people, the third-party enrollment program has a vitally important role to play. And that role is to find genuinely low-risk travelers instead of the millions of people now being diverted into PreCheck lanes via the questionable Risk Assessment and Managed Inclusion programs. Since GAO failed to recommend that the third-party enrollees be <em>replacements</em> for the millions now questionably diverted into PreCheck lanes, Congress should mandate that those two programs be ended immediately (or certainly no later than when the third-party enrollment process is up and running).&nbsp;</p>
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<p><strong><a name="b"></a>Some New Thinking About Passenger Facility Charges</strong></p>
<p>With FAA reauthorization on Congress's agenda this year, the perennial battle between airlines and airports over airport passenger facility charges (PFCs) is shifting into high gear. The two principal airport organizations&mdash;ACI-NA and AAAE&mdash;have formed a joint lobbying effort called Airports United. Increasing the federal cap on PFCs from the current $4.50 to $8.50 is first on its list of eight core issues for Congress.</p>
<p>Shedding some useful light on the debate is a new report from the Government Accountability Office: "Commercial Aviation: Raising Passenger Facility Charge Would Increase Airport Funding, but Other Effects Less Certain" (GAO-15-107). The main take-away from this report is GAO's finding that the likely reduction in airline passengers due to any of the likely PFC increases would be very small. As calculated by GAO using best-available estimates of the elasticity of demand (-0.8), the reduction in airline revenue (and hence in Aviation Trust Fund ticket tax revenue) ranges from a low of 0.58% (current PFC cap adjusted for inflation using the CPI) to a high of 1.68% for the $8.50 cap. These numbers are all for revenue in 2024, nine years after the assumed start of the higher PFC in 2016. But given that airlines, the FAA, and nearly everyone else assumes that air travel will continue increasing between now and 2024, the Trust Fund impact simply means the growth in its revenue will be slightly less than otherwise, not that it would go down due to the higher PFCs. So that's one score in favor of the airports.</p>
<p>A second potential score for airports appears without comment on page 8 of the report. GAO finds that "All these taxes and fees [including the PFC] are part of the ticket purchase transaction and together make up 13.7 percent of the total cost of a ticket on average, with the PFC representing about 2.9 percent of the total ticket cost." That's considerably less than the 20% regularly cited by Airlines for America as the fraction of a "typical $300 roundtrip domestic ticket" consisting of aviation taxes. GAO provides no details on how it arrived at its number, and A4A does not make it easy to see whether their number is actually typical or something of a worst-case example.</p>
<p>Airline rhetoric on a potential PFC increase seems to have improved over the last year or two. In prior battles, conservative non-aviation-savvy members of Congress were often bamboozled into opposing an increase by the claim that it would be a "huge federal tax increase." In fact, PFCs are not federal, nor are they a federal tax. They are local, employed at the option of each airport, and they meet a legal and common-sense definition of a user fee (or perhaps user tax) in that they can only be used for FAA-approved capital improvement projects at the airport in question. At least we are not hearing that kind of baloney this time around.</p>
<p>A new white paper from ICF International calls on the airport community to think more strategically about the overall U.S. aviation program, heading into the 2015 reauthorization. The airports' focus should be directed more towards finding common ground with other key aviation stakeholders on de-politicizing aviation infrastructure funding, thereby reducing Washington's control of aviation. The author of the paper is Steve Van Beek, who served three years on the FAA Management Advisory Council (2011-2013) and helped author its unanimously approved recommendations for reform. The four main recommendations were to eliminate general fund support for aviation infrastructure in favor of 100% user fees, to separate the air traffic control system (the Air Traffic Organization) from the FAA with user funding, to repeal existing federal user taxes, and to provide a new governance-by-stakeholders mechanism for the independent Air Traffic Organization. The MAC report showed in detail why the current federal aviation funding system is unsustainable.</p>
<p>Van Beek told <em>Aviation Daily</em> (Feb. 2, 2015) that "If airports and other interests focus solely on their parochial needs, the most-likely result is a status-quo bill that does not address airport or industry's needs." The large-scale reform envisioned by the MAC would obviously have to address airport capital improvements and how to fund them, but within a context very different from the status quo&mdash;especially if all existing aviation excise taxes were repealed, as the airlines want. That would open the door for airport groups to advance a bolder proposal for airport self-funding, rather than simply tinkering with the present combination of PFCs and AIP grants. If airlines are serious about scrapping the existing aviation taxes, they have an obligation to help figure out how the airport infrastructure they depend on can be adequately funded going forward.</p>
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<p><strong><a name="c"></a>Should Airport Workers Be Screened?</strong></p>
<p>Last month brought news that a Delta worker had been arrested in New York and charged with smuggling guns from Atlanta to New York on 17 Delta flights during 2014. He apparently received the guns after clearing security screening from a Delta baggage handler in a rest room in the terminal. The latter brought the guns into the baggage area and went from there into the terminal to give the back-pack containing them to the worker for each of the 17 trips. The baggage area is part of the sterile area, beyond passenger screening. But there is no routine screening of airport workers arriving at the airport, and those employees have unescorted access to all parts of the airport, including the ramp and the terminal.</p>
<p>Atlanta is hardly alone in not screening employees. According to a well-researched article by Susan Carey in the <em>Wall Street Journal</em> (Jan. 28, 2015), only two of the 450 airports with TSA passenger and baggage screening regularly screen all employees with access to secure areas: Miami and Orlando. Other airports rely on (1) required background checks of employees, including an FBI criminal history check, and (2) random screening. Generally speaking, airports and airlines have argued that 100% employee screening would not be cost-effective.</p>
<p>While I have never seen a decent benefit/cost analysis of 100% employee screening, that is certainly the kind of analysis that should precede any decision to mandate such screening. The <em>Wall Street Journal</em> article cites a GAO report that told of a TSA contractor in 2008 testing enhanced screening at several airports, leading it to estimate a cost range of between $5.7 billion and $14.9 billion per year for total employee screening at all TSA-served airports. That would be a huge increase in TSA's current budget of $7.3 billion a year. While those cost estimates should give us pause, there are several problems with those numbers. First, they assume that TSA itself would be doubled or tripled in size to do the screening. Second, they fail to consider a much less costly alternative: increased random screening.</p>
<p>The article reports that 100% employee screening at both Miami (MIA) and Orlando (MCO) is carried out by security contractors, not TSA. MIA's was begun in 1999, after a much-publicized bust of a guns-and-drugs smuggling operation that involved 58 airline and catering workers. MCO launched its employee screening operation in 2007, after publicity over two Delta commuter workers who were smuggling drugs and guns to Puerto Rico. Although MIA is larger in terms of passenger volume, its program costs less than MCO's, with MIA's currently at $3.1 million a year and MCO's at $3.5 million a year. In 2013 those two airports handled 4.9% of total U.S. passenger enplanements, and their employee screening budgets totaled $6.6 million. If we assume (unrealistically) that their cost of screening would be 4.9% of the total if all airports contracted for employee screening, that total would be $135 million a year&mdash;a minuscule fraction of the estimated cost of a national TSA-run employee screening operation. Even if we doubled or tripled that $135 million figure, to account for diseconomies of scale at smaller airports, it is still a tiny number. At MIA, employee screening constitutes 0.3% of its $955 million annual budget; the figure for MCO is 0.8% of its $406 million budget. Those cost blips are covered by overall airport revenues, mostly derived from airline fees and charges.</p>
<p>Numbers like these put a whole different light on the benefit/cost calculation&mdash;which still needs to be done. While none of the publicized incidents&mdash;at Atlanta, Miami, and Orlando&mdash;has involved terrorists, they have illustrated security vulnerabilities that terrorists could certainly exploit. It's long past time to take those vulnerabilities seriously.</p>
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<p><strong><a name="d"></a>Slot Auctions vs. Runway Pricing</strong></p>
<p>Last month the FAA issued a Notice of Proposed Rule Making (NPRM) about new rules for allocating landing slots at the three routinely congested New York area airports: Kennedy (JFK), LaGuardia (LGA), and Newark (EWR). The current FAA slot rules will expire on Oct. 29, 2016, so this is FAA's first step in getting inputs on their replacement.</p>
<p>The NPRM offers five alternative ways of creating a new auction process for under-used slots, hoping this will provide incentives for airlines to sell such slots to airlines that can make better use of them. It would slightly strengthen the current 80% use-it-or-lose-it rule for slots at these airports.</p>
<p>Unfortunately, left unaddressed is the alternative of runway pricing as a method of getting the most productive use out of a congested airport's limited capacity. Back in 2007, Ben Dachis and I produced a major Reason Foundation study analyzing how market pricing would change how airlines use JFK, LGA, and EWR under a pricing system in which runway charges were set for each quarter-hour period of the day, based on estimated demand. Our modeling showed significant up-gauging of aircraft and a reduction of peaks and valleys in runway use over the course of each day.</p>
<p>In an article in this newsletter's December 2007 issue, I noted the advantages of runway pricing over slot auctions. A brief summary of these advantages is as follows:</p>
<ul type="disc">
<li>Pricing would produce large <em>near-term</em> reductions in runway congestion compared with slot auctions, which in any likely model would affect usage only at the margin, over many years.</li>
<li>A pricing system would underscore that airlines do not "own" slots, as the U.S. DOT has always insisted, despite airline claims that they do.</li>
<li>All airlines, <em>including foreign carriers</em>, would pay the runway charges, which would simply be an expansion of airports' long-standing authority to charge for runway use. Under current U.S. practice, foreign carriers are generally exempt from slot allocations.&nbsp;</li>
<li>Non-scheduled operators, such as fractionals and corporate jets, would have better long-term access to airports like LGA and JFK under a pricing system than under a slot system.</li>
<li>Congress would be less likely to impose exemptions and controls on a runway pricing system than on a slot system, since runway pricing is traditionally a matter for airports and airlines, not legislators.</li>
</ul>
<p>Few aviation people seem to be aware that runway pricing is legal in the United States, thanks to the efforts of the U.S. DOT under former Secretary Mary Peters, who introduced pricing-friendly changes to DOT's airport rates and charges policy in 2008. The Air Transport Association litigated against the changes, but they were upheld by the Court of Appeals in July 2010. You can get a quick overview of the issues involved from a four-page September 2010 briefing paper from aviation consultants LeighFisher, "New Congestion Pricing Ruling: What It Means and Ways It Can Be Applied." (<a href="http://www.leighfisher.com/sites/default/files/free_files/focus_congestion_pricing_ruling_sep2010.pdf">www.leighfisher.com/sites/default/files/free_files/focus_congestion_pricing_ruling_sep2010.pdf</a>)</p>
<p>Although no U.S. airports have implemented this kind of pricing, the report cites three examples from Europe. London Gatwick's landing fees vary by time of day and season of the year, and the highest peak rates are 205% greater than non-peak rates. Manchester (U.K.) also has peak rates during busy periods of the day, as well as seasonal rates; rates also vary by aircraft noise category. Prague charges time-of-day aircraft parking fees, with peak rates 100% more than non-peak rates.</p>
<p>The report also explains what is and is not possible under the revised DOT rates and charges policy. And it notes that runway pricing cannot be imposed by the FAA; it is an option available to airports.</p>
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<p><strong><a name="e"></a>Los Angeles vs. Ontario: the Saga Continues</strong></p>
<p>The long-running battle continues over control of Ontario International Airport, in the eastern part of the greater Los Angeles metro area, with an important new development in court last month.</p>
<p>If you're new to this subject, the City of Ontario back in 1967 entered into a joint powers agreement with the City of Los Angeles, under which the former sold the underutilized Ontario airport to the latter, whose city airport department&mdash;Los Angeles World Airports&mdash;owns and operates LAX and Van Nuys, in addition (since 1967) to Ontario. As part of the deal, LAWA agreed to spend at least $20 million to expand the airport in hopes of attracting more airline service. LAWA replaced the old terminal with two new ones, at a cost of $270 million, and enplanements increased from 400,000 in 1967 to more than 6 million a year in the 1990s.</p>
<p>In response to local opposition to expanding runway capacity at LAX, transportation planners in the greater LA region came up with the idea of "regionalization," envisioning a new regional airport authority that would distribute airline service among Burbank, LAX, Long Beach, John Wayne (Orange County), and Ontario. No such entity was ever created, but many elected officials gave lip service to the concept.</p>
<p>Unfortunately, in the mid-2000s the Southern California housing market collapsed, and one of the side effects was a decrease in air travel. The same phenomenon affected much of the country, known as the Great Recession. While it affected all airports, smaller hubs were generally hit harder than larger ones, and the greater LA region was no exception. In 2000, Ontario's share of the greater LA airline passenger market was 8.8%. It was still at 8% in 2007, at the start of the recession, but has declined steadily since then to 4.5% in 2013. (ONT showed a slight increase in 2014, but full-year figures are not yet available.) Between 2007 and 2013, LAX's market share increased from 69.3% to 75.4%.</p>
<p>Ontario city officials blame LAWA for neglecting ONT, as if airport managers could force airlines to increase service to an airport, when this is clearly&mdash;both as a matter of business decision-making and the law&mdash;entirely an airline decision (subject, of course, to being able to lease gate space and being willing to pay what it costs). Ontario's case also ignores the general phenomenon of smaller hubs generally losing service during the past 10 years. Comparing enplanements in 2013 with those of the prior year, FAA data show the following average changes:</p>
<ul>
<li>30 large hubs: +1.51%</li>
<li>35 medium hubs: -0.54%</li>
<li>35 smaller hubs: -0.58%</li>
<li>35 smallest hubs: -1.18%</li>
</ul>
<p>Within each category, of course, there are significant variations, including a few sharp deviations from the trend. ONT is in the medium-hub category, and its enplanements decreased 8.02% in 2013 from the previous year. The best performing medium hub was New Orleans Louis Armstrong, up 6.59%. But the worst performer was Memphis, down a whopping 31.51%. And Memphis has no large hub nearby that can be blamed for stealing traffic!</p>
<p>The long-running litigation by Ontario against Los Angeles reached a key decision point on January 22<sup>nd</sup>, when Superior Court judge Gloria Connor Trask decided that (1) the 1967 agreement was, in fact, a <em>sale</em> of ONT to Los Angeles, and (2) that the four-year statute of limitations (on voiding or changing the deal) had long since passed. So those two problems are now presumably put to rest. Still pending is the rest of the lawsuit, which alleges breach of contract and violation of fiduciary duty by LAWA; that case, alas, will be heard by a jury later this year.</p>
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<p><a name="f"></a><strong>News Notes</strong></p>
<p><span style="text-decoration: underline;">IATA Disagrees with PFC Article</span>. Perry Flint of IATA headquarters in Montreal responded to the article last issue contrasting IATA's general policy favoring "passenger-based airport charges" with the opposition by U.S. member airlines to the use and expansion of passenger facility charges in this country. He pointed out that IATA "strongly opposes any lifting of the [PFC] cap at this time." He noted that "while it is correct that&mdash;as a general policy position&mdash;IATA recommends direct charges on passengers to progressively recover aeronautical infrastructure costs, this is only after the cost itself is justified and has been subjected to a meaningful consultation with users." And that, he maintains, is not the case with the U.S. PFC program, whose flaws, he wrote, include the absence of any meaningful consultative role for airlines in the process, the lack of any requirement for a rigorous cost/benefit analysis, and "PFC investment criteria that are so broad as to justify virtually any new spending related to airport infrastructure."</p>
<p><span style="text-decoration: underline;">New Screening Contractors at Two Airports</span>. The TSA has selected Trinity Technology Group to be the screening contractor at Sarasota-Bradenton Airport in Florida, starting February 1<sup>st</sup>. Airport CEO Fredrick Piccolo said the main reason for switching from TSA to contract screening is to get increased flexibility in scheduling screeners, to provide better service to customers. And at Kansas City International, Akal Security will be replacing FirstLine Transportation Security as the screening contractor. KCI was one of the five airports in TSA's original private screening pilot program, and has held the contract since 2002. When its latest contract was due to expire, TSA selected Akal as its preferred bidder.</p>
<p><span style="text-decoration: underline;">Airport Privatization Change in Turkey</span>. TAV Airports, which currently operates Istanbul Ataturk International Airport, has begun planning for the day when Ataturk is shut down after Istanbul's huge new airport opens a decade or more from now. Rather than bidding on that project, TAV is increasing its investment in Istanbul's second airport, Sabiha Gokcen. Last fall it purchased Limak Group's 40% stake in Sabiha Gokcen and will become equal partners with Malaysia Airports in this airport. They plan to open a second runway by 2017 and a second terminal by 2025.</p>
<p><span style="text-decoration: underline;">Two Finalists for LaGuardia Terminal PPP</span>. Agreement was reached just before the holidays between the governors of New York and New Jersey and the Port Authority to complete the ongoing public-private partnership procurement of a design/build/finance/operate/maintain consortium for the $3.6 billion replacement of the Central Terminal at LaGuardia Airport. The two finalists are LGA Gateway Partners (including Meridiam/Vantage Airports Group/Skanska) and LGA Central Terminal Consortium (including GS Global Infrastructure Partners II/Zachry Construction/Aeroports de Paris). Final selection is to occur during the first quarter of this year.</p>
<p><span style="text-decoration: underline;">Porter Airlines Sells Toronto Terminal</span>. Spunky Porter Airlines, whose home base is its terminal at Billy Bishop Airport on an island in downtown Toronto, has finalized the sale and lease-back of its terminal. The buyer is Nieuport Aviation Infrastructure Partners, a relatively new infrastructure investment fund. The airport is Canada's ninth busiest, and served 2.4 million passengers in 2014. Shortly before the sale, Air Canada announced that it is considering ending its service at Billy Bishop.</p>
<p><span style="text-decoration: underline;">$4 Billion People Mover for LAX Approved</span>. The board of Los Angeles World Airports has green-lighted the Landside Access Modernization Program (LAMP) for LAX. The $4 billion project will add an off-site check-in facility, consolidated rental car center, and the LAX Automated People Mover. (OK, as reported last issue the APM itself will account for "only" about half of the $4 billion total, which still means it will cost about <em>a billion dollars per mile.</em>)</p>
<p><span style="text-decoration: underline;">Paulding Atlanta Airport Facing New Opposition</span>. In November the FAA approved the start of an environmental assessment of the plan by Paulding County Airport and Propeller Investments to build a small passenger terminal and help the fledgling airport attract some scheduled passenger service. But opponents bankrolled two anti-airport candidates for the five member County Commission, who won in November and took their seats this month, creating a new 3-2 majority against the airport plan. Last fall the former County Commission voted to give most of the control of the airport to the airport's own board. The new Commission on Jan. 16<sup>th</sup> voted 3-2 against commercial service at the airport. Both Propeller and the anti-airport commissioners have complained to the U.S. DOT about the other side's position in this controversy.</p>
<p><span style="text-decoration: underline;">Berlin's New Airport to Open in 2017&mdash;Maybe</span>. Originally set to open in late 2011&mdash;and appearing to be finished&mdash;Berlin's ill-fated new airport, on the site of the former East Berlin Schoenefeld Airport, has been plagued by construction defects and safety concerns. Last month brought word, via an AP story, that the opening will finally take place in the second half of 2017. I'm not holding my breath.</p>
<p><span style="text-decoration: underline;">Chinese Firm Buys Half of Toulouse Airport</span>. Shocking many French people, the winning bidder for a 49.99% stake in Toulouse-Blagnac Airport, announced last month, was Symbiose, a joint venture of Hong Kong-based Friedman Pacific Asset Management and state-owned Shandong High-Speed Group, a diversified Chinese transportation company. The other short-listed finalists were all French consortia, including such players as Vinci Airports and Aeroports de Paris.</p>
<p><span style="text-decoration: underline;">DHS Inspector General Protests Redactions in Audit Report</span>. The Inspector General of the Department of Homeland Security, John Roth, issued a news release on Jan. 23<sup>rd</sup> protesting actions by the TSA that redacted significant material in his audit report on security controls for DHS information technology systems at JFK International Airport. Roth objected to the designation of portions of the report as Sensitive Security Information (SSI), which is illegal to disclose to the public. However, Roth has furnished an unredacted version of the report to the congressional committees with oversight of TSA.</p>
<p><span style="text-decoration: underline;">Privately Funded Airport Opens in Australia</span><em>. Infrastructure Investor</em>'s latest issue reports the opening of Wellcamp Airport in Toowoomba, west of Brisbane, the country's third largest metro area. The $172 million airport was financed and built by family-owned Wagners, one of Australia's largest construction companies. The new airport has attracted airline service so far from Regional Express and QantasLink.</p>
<p><span style="text-decoration: underline;">New Report on Airport Sound Insulation Programs</span>. The Airport Cooperative Research Program of the Transportation Research Board has issued "Guidelines for Ensuring Longevity in Airport Sound Insulation Programs," ACRP Report 105. It is a companion to Report 89, "Guidelines for Airport Sound Insulation Programs." Both are available via the TRB website.</p>
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<p><strong><a name="g"></a>Quotable Quotes</strong></p>
<p>"[A]irports and their representatives should start by supporting MAC-like FAA reforms in the areas of financial sustainability, industry governance, and policy. Such measures would remove key parts of the aviation system from the political and budgetary process and place the operation of air traffic control, and investments in it, on more sustainable foundations."<br /> &mdash;Steve Van Beek, in Sean Broderick, "ICF: Time Ripe for Airports to Drop PFC, AIP Demands; Back Broad FAA Reform," <em>Aviation Daily</em>, Feb. 2, 2015</p>
<p>"The Canadian government has just announced the opening of 'fast-lane' security screening at four of Canada's busiest airports. But it doesn't quite measure up. Unlike the U.S., these new lines won't be accessible for domestic flights. Only those flying to the States will benefit from them. If a low-risk traveler is permitted to bypass regular screening for an international flight, why can't they do the same when flying within Canada? The fact is that the bulk of Canadian air travel is domestic. So for the majority of NEXUS card holders, Transport Canada's announcement will have no impact on them this holiday season. The government can and should do better by offering expedited screening at all major airports for both domestic and international flights."<br /> &mdash;Colin Kenny, former chair of the Canadian Senate Committee on National Security and Defense, "We Need to Fix Canada's Half-Baked Airport Security System," <em>Huffington Post Canada</em>, Dec. 31, 2014</p>
<p>"There is no way to make money off of an APM [Automated People Mover]. It's essentially a sunk cost that you have to find other mechanisms to pay for. And they [airlines] worry all the time that the mechanism to pay for them is going to be them."<br /> &mdash;Gina Marie Lindsey, Executive Director, Los Angeles World Airports, in Brian Sumers, "LAX to Spend $4 Billion on Ground Transport Projects," <em>Aviation Daily</em>, Dec. 22, 2014</p>
<p><a href="#top">&raquo; return to top</a></p>1014149@http://www.reason.orgTue, 03 Feb 2015 17:00:00 ESTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #103http://www.reason.org/news/show/airport-policy-security-news-103
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">Airline support for PFCs?</a></li>
<li><a href="#b">Airport privatization on the rise in Europe</a></li>
<li><a href="#c">Politics upsets LaGuardia revamp</a></li>
<li><a href="#d">U.K. Airports Commission seeks a solution</a></li>
<li><a href="#e">Are new airport trains worth what they cost?</a></li>
<li><a href="#f">News Notes</a></li>
<li><a href="#g">Quotable Quotes</a></li>
</ul>
<p><strong><a name="a"></a>Airline Support for Passenger Facility Charges</strong></p>
<p>Last issue's article about U.S. airports' new efforts to obtain an increase in the federal cap on individual airports' passenger facility charges (PFCs) generated a lot of comments. One retired airline CEO opined, "Airlines, if they had any sense, would support raising the PFC. <span class="GramE">The</span> alternative is more and more run-down facilities, which neither they nor their customers will enjoy." I wish he would say that publicly!</p>
<p>But the most interesting comments came from a relatively new (but aviation-savvy) staffer at the International Air Transport Association (IATA), the global airline trade organization. He expressed surprise at the U.S. airlines' opposition to a more robust PFC regime, as being contrary to the position of many IATA member airlines. And to back this up, he attached a one-page IATA document titled "Passenger Based Airport Charges." In bold type under this headline, the document says, "It is in the interest of both the airport and the airlines to recover these costs [of facilities to serve passengers] through passenger based charges instead of other aeronautical based charges."</p>
<p>In the body of the document, it states as the IATA position the following:</p>
<p>"Overall, IATA recommends airports to progressively recover aeronautical infrastructure costs through direct passenger based charges instead of other aeronautical based charges. It should be noted that any passenger based charge needs to be in full compliance with the applicable legal and regulatory obligations."</p>
<p>It goes on to <span class="GramE">add that</span> "Wherever possible and practical, airports should transition to passenger based charges. This can include a combination of one or more of the following steps:</p>
<ol>
<li>Per passenger calculation [rather than based on numbers of flights or landed weight]</li>
<li>Cost recovery from passengers [in accord with IATA user-pay principles]</li>
<li>Collection mechanism [by the airlines, on behalf of the airport]"</li>
</ol>
<p>The document concludes by stating that the key benefits of charging per passenger are:</p>
<p>(1) <span style="text-decoration: underline;">Accountability</span> [so that passengers can see what they are paying and compare it with what other airports charge] and,</p>
<p>(2) <span style="text-decoration: underline;">Risk sharing</span> [with airlines paying for runways and passengers paying for terminals].</p>
<p>I'm amazed that this strong support for PFCs at the international airline level is so little known in this country&mdash;to reporters, to members of Congress, and to taxpayer groups that for many years have been bamboozled into believing airline propaganda calling an increase in the PFC cap "a federal tax increase," when it is nothing of the sort.</p>
<p>But I also want to suggest that U.S. airlines have a new reason to take a fresh look at PFCs in the upcoming FAA reauthorization. It's been clear for several years that the current federal funding structure for aviation is not sustainable. That was the conclusion of the FAA's own 2011-2013 Management Advisory Council even before the budget sequester that led to furloughs of air traffic controllers and the near shut-down of 149 contract towers last year. That situation is a key factor in growing support for taking the Air Traffic Organization (ATO) out of the FAA and making it self-supporting from a new set of ATC fees and charges, consistent with the ICAO charging principles used everywhere else in the world.</p>
<p>Most airlines support that major change&mdash;but insist that if they are going to be paying ATC fees sufficient to support the capital and operating costs of a self-supporting ATO, then <em>all the existing federal aviation excise taxes</em> must be abolished. That sounds fine . . . until you come to the other use of the revenue from those taxes: the Airport Improvement Program. AIP currently gets $3.4 billion from those taxes, nearly half of which goes to large, medium, and small airports (which handle nearly all airline service) and the other half to non-hubs, relievers, and general aviation airports. If those taxes all go away, how could airports make up for their current $3.4 billion in AIP grants?</p>
<p>One way would be for the large, medium, and small hubs to be allowed to increase their PFCs to a level that would replace what they formerly received from AIP (about $1.46 billion a year). That would leave just under $2 billion a year to make up for current AIP spending on non-commercial airports, plus FAA's administrative costs for managing AIP. The answer to that is the "general support contribution" to FAA's budget, which in recent years has ranged between 20 and 30%. Figuring 25% of the current $15.3 billion FAA budget yields general support of about $3.8 billion. That should be enough to cover FAA's current safety and miscellaneous non-ATC activities, along with the $1.75 billion it now spends on AIP grants for non-commercial airports.</p>
<p>Under this approach, airlines would get their wish&mdash;abolition of all the current aviation excise taxes, and a self-supporting ATC system separate from FAA. Small airports would get their current level of AIP grants, now paid for out of the general fund portion of FAA's budget. The only thing the airlines would have to do is to allow commercial airports to replace their AIP grants with self-generated revenues from increased <span class="SpellE">PFCs.</span></p>
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<p><strong><a name="b"></a>Airport Privatization on the Rise in Europe</strong></p>
<p>France and Spain are in the process of launching new rounds of airport privatizations, and there are quite a few transactions taking place elsewhere in Europe, as well.</p>
<p>Spain's long-awaited privatization of its 46 commercial airports (including Barcelona and Madrid) has gotten under way with the separation of the air traffic control function from state aviation company AENA. (The now-separate air navigation service provider is called ENAIRE.) Next, the government sold 21% of what is now a purely airports company<span class="GramE">,&nbsp; AENA</span>, to three "cornerstone" investors for $2 billion. They are U.K.-based Children's Investment Fund, <span class="SpellE">Ferrovial</span> <span class="SpellE">Aeropuertos</span>, and <span class="SpellE">Corporacion</span> <span class="SpellE">Financiera</span> Alba. Another 28% of AENA will be sold to investors early in 2015 via an initial public offering (IPO) of shares on the Madrid stock exchange. That will leave the government with 51%. Based on the initial price for the first 21%, analysts expect the IPO to increase the government's overall proceeds to as much as $5 billion.</p>
<p>France is also on the threshold of a new era of airport privatization. Until the early 2000s, all commercial airports in France were owned by the national government. Early in that decade, except for the Paris airports, the government devolved significant control of commercial airports to local governments, giving them partial ownership stakes. In 2006, <span class="SpellE">Aeroports</span> de Paris (<span class="SpellE">AdP</span>) was <span class="GramE">part-privatized</span> via an initial public offering of shares, with additional small stakes subsequently acquired by Schiphol Group, Vinci, and <span class="SpellE">Predica</span>; today the French government holds 50.6% of <span class="SpellE">AdP</span>. In 2009-2010 the government began allowing companies such as <span class="SpellE">Keolis</span>, SNC-Lavalin, and Vinci to enter into management contracts at secondary and tertiary airports. CAPA Centre for Aviation lists 22 airports with such private-sector operators as of November 2014. In 2009-10, the government allowed Vinci to purchase 99% of four regional airports. And in 2012 the government announced plans to sell its ownership stakes in four primary airports: Bordeaux, Lyon, Montpellier, and Toulouse&mdash;but those plans were put on hold due to the 2013 presidential election. That plan was revived in mid-2014, with Toulouse as the first candidate. Ten companies expressed interest in acquiring the offered 49.9% stake, and three consortia ended up submitting bids by October 31<sup>st</sup>: <span class="SpellE">AdP</span>/<span class="SpellE">Predica</span>, Vinci/CDC/EDF, and SNC-Lavalin. Assuming this sale goes through, CAPA predicts that eight other airports will follow in 2015: Bordeaux, Lyon, Marseille, Montpellier, Nice, Strasbourg and two overseas departments&mdash;Fort de France (Martinique) and Saint-Denis (Reunion).</p>
<p>Greece's privatization agency, Hellenic Republic Asset Development Fund, received three international bids for the first 14 of its 37 regional airports, being offered as a 30-year concession. The winner was <span class="SpellE">Fraport</span>, with a bid of $1.5 billion up-front. The government is also seeking bids to finance, develop, and operate a new $1 billion airport at Heraklion, on the island of Crete, under a 37-year concession; bids are due Dec. 16th. Still undecided is the fate of the government's 55% stake in Athens Airport, developed under a 30-year concession by <span class="SpellE">Hochtief</span> (now <span class="SpellE">AviAlliance</span>) in the 1990s.</p>
<p>Greece's rival Turkey had expected to have its third Istanbul Airport project under way by 2014, after having selected a five-company consortium to develop it under a 25-year concession in 2013. But in February a court put the project on hold, over questions about the adequacy of the environmental impact of the planned six-runway airport estimated to cost nearly $30 billion. Malaysia Airports Holdings, which already owned 60% of Istanbul's second airport (<span class="SpellE">Sabiha</span> <span class="SpellE">G&ouml;kcen</span>), purchased the other 40% from Turkish company the <span class="SpellE">Limak</span> Group.</p>
<p>In the United Kingdom, AENA and its joint venture partner, <span class="SpellE">Ardian</span>, received the OK from the <span class="SpellE">Luton</span> Borough Council to expand the capacity of privatized <span class="SpellE">Luton's</span> terminal from 12 million to 18 million annual passengers, at a cost of $172 million. Two small U.K. airports, formerly privatized, shut down in 2014 when their owners could not afford to continue losing money. Balfour Beatty Infrastructure could not find a buyer for ailing <span class="SpellE">Blackpool</span> Airport, and shut it down in October (though it was subsequently re-opened by a new Balfour Beatty subsidiary as a general aviation airport). <span class="SpellE">Infratil</span> in 2013 sold money-losing Kent International Airport (in <span class="SpellE">Manston</span>) to Scottish entrepreneur Ann <span class="SpellE">Gloag</span>, but she could not turn it around and closed it down in May.</p>
<p>Other privatization developments in Europe include:</p>
<ul>
<li><span style="text-decoration: underline;">Croatia:</span> A consortium led by <span class="SpellE">Aeroports</span> de Paris reached financial close on a $331 million, 30-year concession to expand and modernize Zagreb Airport, the country's largest.</li>
<li><span style="text-decoration: underline;">Denmark:</span> Copenhagen Airport, owned by Ontario Teachers' Pension Plan Board and Macquarie European Infrastructure Fund 3, refinanced $1.05 billion in debt, to take advantage of lower interest rates.</li>
<li><span style="text-decoration: underline;">Hungary:</span> Privatized Budapest Airport completed a $1.4 billion debt refinancing. Budapest's largest shareholder is Canada's Public Sector Pension Investment Board.</li>
<li><span style="text-decoration: underline;">Italy:</span> <span class="SpellE">Corporacion</span> America, which already owns minority stakes in the Florence and Pisa airports, has offered by buy out the government's remaining interest in both of them, offering $110 million for Florence and $55 million for Pisa.</li>
</ul>
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<p><strong><a name="c"></a>Politics Upsets New York Airports Revamp</strong></p>
<p>On October <span class="GramE">20<sup>th</sup> ,</span> the day before the Port Authority of New York and New Jersey was to announce the winner of its competition for a $3.6 billion concession to replace the obsolescent Central Terminal at LaGuardia Airport, Gov. Andrew Cuomo held a news conference (with Vice President Joe Biden) to announce a 60-day competition offering the winners $500,000 to redesign New York's entire airport system. The Port Authority is to manage this new competition.</p>
<p>Three international teams had spent about three years preparing their proposals for the LGA megaproject, while the Port Authority had developed the detailed concession agreement under which the project would take place, as well as negotiating an agreement with LGA's airlines, spelling out their role in the project's financing. Needless to say, this political intervention has left the bidders, as well as PA's aviation staff, aghast. According to the <em>New York Times</em> story on Cuomo's announcement, the Governor "said repeatedly on Monday that he did not intend to pre-empt the Port Authority's decision on the contract to rebuild the 50-year-old Central Terminal <span class="GramE">Building.</span> . . . He said he intended for that selection process and the design competitions to occur simultaneously, suggesting that a new main terminal would have to be built in any case. Still, he acknowledged that the best idea to come out of the open competition might involve changes to the proposal chosen by the Port Authority."</p>
<p>This is yet another example of politics interfering with professional airport management. To be sure, the Port Authority, whose board members are chosen by the governors of New York and New Jersey, has always been a political entity. Its creation reflects the political ideology of the Progressive Era, in which skilled professionals&mdash;separated from politics--centrally plan and control all of a region's transportation infrastructure&mdash;highways, bridges, tunnels, mass transit, airports, and seaports&mdash;siphoning user-fee revenues out of the cash cows to cross-subsidize the weakest facilities. In recent decades, not content with controlling LaGuardia, Kennedy, and Newark, the PA has also acquired far-off Stewart Airport (70 miles north of Manhattan) and Atlantic City Airport.&nbsp;</p>
<p>Cuomo's previous brainstorm was to move all air cargo operations from Kennedy to Stewart, to free up space at JFK for expanded passenger service&mdash;completely oblivious to the logistic system that distributes air cargo from JFK to Long Island, New York City, and elsewhere. According to a 2013 report from the Port Authority, JFK supports an air cargo industry that accounts for 50,000 jobs, $3 billion in wages, and $8.5 billion in sales for the metro area. Customs brokers and freight forwarders are located adjacent to JFK. In addition, over 50% of the cargo volume at JFK is transported as belly cargo on passenger aircraft, which are not about to shift to Stewart. I'm not aware of any actions taken in response to this proposal, but it has not been withdrawn, either.</p>
<p>The Governor's contest will no doubt produce visionary plans of fast trains direct to each airport, new runways on platforms into adjoining bays, and all sorts of other grandiose ideas that are neither politically nor economically feasible. While we are dreaming such dreams, why not think really big? Break up the PA's airport oligopoly, privatize the individual airports, and let them compete to develop the best ways to serve their various customers.</p>
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<p><strong><a name="d"></a>Britain's Airports Commission Seeks a Solution</strong></p>
<p><em>A special report by David Bentley</em></p>
<p>One of the biggest decisions ever to be made on transport policy in the U.K. is expected in the early summer of 2015. At roughly the same time as a general election must be held (there are now fixed five-year terms for Parliament), the Airports Commission, an independent body set up by government in 2012 broadly to examine U.K. airport capacity needs, will deliver its final verdict. The debate on this matter now stretches back over six decades and many other commissions have tried and failed to solve the conundrum.</p>
<p>There is some confusion in the general media as to what the Commission's remit is. Frequently one reads that it is to determine if a new runway should be built in southeast England (around London) and, if so, where it should go. But the brief given to Sir Howard Davies, the Commission's chairman, was broader than that. It is: to consider how the U.K. can "maintain its status as an international hub for aviation and immediate actions to improve the use of existing runway capacity in the next five years." However, congestion and constraint is at its highest in the southeast. Davies admits that is possibly the wrong question. However, it is the one he has to work with.</p>
<p>That brief could have opened up a Pandora's Box of intrigue. For example, one study identified redundant, unused runway capacity at commercial airports in the U.K. as being <em>15 times</em> greater than what any single additional runway in the southeast could provide. The invitation to environmentalists, politicians and those simply just not convinced by the argument in favor of any new runway was that the redundant runways should (somehow) be put to better use first and, indeed, they were quick to respond to it, vigorously.</p>
<p>But in fact the opposite happened. For example Manston Airport in Kent, 60 miles from central London, potentially linkable by a high speed rail spur and with a runway capable of handling the A380, closed down in May of this year. This represents a downside of privatization, where a struggling airport, but one that could have a much wider role than it does, is acquired by entrepreneurs, resold, and eventually identified for the value of the land for industrial or residential purposes rather than to satisfy a transport demand.</p>
<p>But the commercial emphasis in the U.K. over the last two decades has been on London itself, its financial sector, and specifically on Heathrow Airport, which its management has told us ad nauseam, is "the U.K.'s only hub airport." Not only that; Heathrow Airport Holdings never shirks from informing anyone who will listen that airlines could not operate with such frequency at Heathrow if not for its connecting hub traffic. But 70% of Heathrow's passengers are origin &amp; destination. If airline schedules were curtailed to fit O&amp;D demand it could happily exist on its two runways.</p>
<p>Davies' Interim Report in December 2013 identified three options:</p>
<ul>
<li><span class="MsoListParagraphCxSpFirst">A new runway at Heathrow;</span></li>
<li><span class="MsoListParagraphCxSpMiddle">Extension of the existing northern runway at Heathrow to permit take off and landing on it simultaneously;</span></li>
<li><span class="MsoListParagraphCxSpMiddle">A new runway at Gatwick Airport.</span></li>
</ul>
<p class="MsoListParagraphCxSpLast">In doing so, Davies dismissed many other long-term suggestions to solve the conundrum involving both existing and envisaged airports in different parts of the country; over 50 in all.</p>
<p>As for short term "immediate actions," the Commission has come up with some concrete proposals to improve surface transport access to major airports and will be helped by the forthcoming completion of many projects around the country including Crossrail in the southeast and the Northern Hub (both of them rail schemes).</p>
<p>But the focus is on the long-term decision and whether the recommendation will be for a new runway or whether there will be another attempt to "kick the matter into the long grass." It might be argued that the government cannot fudge the issue yet again, or it would have no credibility left on this matter. More to the point, corporate businesses would be outraged. Some have already threatened to quit the U.K. altogether.</p>
<p>Of the three options, an additional runway at Heathrow has always been more popular amongst powerful business interests, most politicians, and the airlines. Latterly an additional one at Gatwick has gained increasing favor. Gatwick's argument is based on the greater prevalence of air transport models such as low-cost airlines and self-connection in the future; the likelihood that the B787 and A350 will "hub-bust" airports like Heathrow in favor of smaller ones; and the need for greater passenger choice.</p>
<p>Just this month Sir Howard Davies released yet another invitation for organizations and individuals to comment on aspects of the decision-making process: in this case specifically with regard to the costs of each of the submissions and how those costs will influence charges to airlines and airfares; the environmental effects with specific regard to noise; the provision of surface transport connections in each case; and the economic impact of each submission. Meanwhile in the background another sub-committee is investigating regional connectivity via London. The phrase "paralysis by analysis" comes to mind.</p>
<p>As things stand Gatwick certainly has the cheapest option, though Davies is convinced all three proposals are very conservatively costed. Gatwick also believes it can undertake the new runway project without materially hiking up airline charges. While the media seized on the costs element, my personal view is that British politics is influenced to a far greater degree by environment and economic impact considerations.</p>
<p>Gaining political consensus is essential to all of this. The whole idea of the Commission was to ensure that sufficient time elapsed to ensure all-party support was achieved before an announcement was made that involved a new runway. But such support has not materialized. At its recent annual conference, Liberal Democrat party delegates voted to retain its policy of "no net runway increase" in the U.K., despite pleas from its leaders. As things are shaping up now the Lib Dems may well form part of another coalition government next year. It cannot over-ride the wishes of its members.</p>
<p>So while a new runway at Heathrow and one at Gatwick were running neck and neck, it seems now that the third option, the Heathrow runway extension, might come into play. It could be argued that would not constitute a "net runway increase." Semantics perhaps, but that is often what politics is about.</p>
<p>But even that is not the end of it. Many of the airports overlooked by the Commission in the Interim Report are keen to re-enter the fray, if they see any backtracking by Davies. They include London Stansted Airport, Manchester Airport (both now owned by the same group), and notably Birmingham Airport. All three have considerable capacity to spare. Birmingham's case revolves around its central position in England and its excellent transport links, which will be enhanced by the HS2 high-speed rail line to and from London, scheduled (if built) to come on line in 2026, and which will permit a terminal to central London journey time of just 49 minutes.</p>
<p>There is also the political need to "re-balance the economy" in favor of regions outside of the southeast, acknowledged by government but little acted upon until the recent Scottish independence vote. The U.K. seems to be on the path towards a federal system of government as in Germany. Large English city-regions that are already seeking their own "devolution" from the UK, with additional tax and spend powers, may well achieve their aim. Indeed, one of them (Manchester) already has. Separately, the Chancellor, George Osborne, whom many believe will be the next Prime Minister, also champions the creation of a "northern economic powerhouse" of several cities to rival London. Should this come to pass, this powerful new region would seek to develop further its own hub airport at the expense of London, and much of Davies' work might have been academic.</p>
<p>Clearly there is much still to play for in what is one of the longest and most drawn-out sagas in aviation history.</p>
<p><em>David Bentley is Chief Airports Analyst for CAPA &ndash; Centre for Aviation, </em><a href="http://www.centreforaviation.com"><em>www.centreforaviation.com</em></a><em>, and author of an independent 2013 report on UK airport capacity</em>.</p>
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<p><strong><a name="e"></a>Are New Airport Trains Worth What They Cost?</strong></p>
<p>Last month Oakland Airport opened its new automated people mover connecting the terminals with the BART heavy-rail station 3.2 miles away. It replaces the <span class="SpellE">AirBART</span> bus that I used to ride when I lived in California to get to BART. The bus was slower and cost $3 each way. The new people mover will be faster, and will offer shorter waits between trips, for a $6 one-way fare. But does it represent good value for the taxpayers who pay for most of BART's costs?</p>
<p>The largely elevated system cost $484 million to build, which works out to $151 per mile. Despite not having drivers, it will cost about $13.5 million a year to operate. At projected levels of ridership, BART expects to generate about $6 million a year in <span class="SpellE">farebox</span> revenues at $6 per trip, meaning the operating subsidy will be $7.5 million per year. For that capital plus operating costs, will the system add that much value for the several thousand people a day expected to use it? The <span class="SpellE">AirBART</span> buses were slower, but they cost only a small fraction of what the people mover costs.</p>
<p>Moving up the scale in cost is the Sky Train at Phoenix Sky Harbor Airport. Its first stage, opened last year, is 1.7 miles long and links a nearby light rail stop and the east parking lot with Terminal 4. Subsequent stages will extend the line to Terminal 3, and later on to the west parking lot and the rental car center. This system is being developed and paid for by the airport, so the costs are being met out of airport (airline and passenger) revenues, not tax money. But the same kind of value-for-money question needs to be asked. The total cost of the full system's 4.9 miles is estimated as $1.58 billion&mdash;a whopping $322 million per mile. (This is partly because it is the nation's first people mover that crosses over an active taxiway.) There is no charge to use the system, so the operating costs are also coming out of airport revenue. Prior to Sky Train, all these connections were made via buses. Is the marginal improvement in travel time and convenience really worth $1.58 billion plus the operating costs?</p>
<p>Then there is Los Angeles, my former <span class="GramE">home town</span>. City and airport officials are considering plans to relieve chronic congestion on the two-level roadway that links the seven terminals. <span class="GramE">Two sensible ideas that other airports have long since adopted are (a) a consolidated rental car center, and (b) an integrated transportation center, both about a mile east of the Central Terminal Area.</span> But of course, this being LA, they would not dream of linking these new facilities with a fleet of zero-emission buses. Instead, the debate is over which of two rail-based people mover plans to adopt. One&mdash;the "spine"&mdash;would provide a single route down the middle of the Central Terminal Area, from which people would walk to the terminals on either side. The alternative is the "scissors" which would have one link on each side of the CTA, providing passengers with shorter walks to their terminals. The spine would be about 1.5 miles long, and would cost&mdash;wait for it--$1.5 to $2 billion. And the scissors would be closer to 2 miles and would cost $2.0 to $2.5 billion. Even at the low end of the cost range, that's <em>$1 billion</em> per mile, making Phoenix and Oakland look like pikers.</p>
<p>Yet with most parking removed from the CTA, and consolidated buses serving the rental car center and the transportation center, the congestion problem would be solved without spending several billion dollars on a people mover system. Whoever is expected to pay for this boondoggle should start objecting now.</p>
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<p><a name="f"></a><strong>News Notes</strong></p>
<p><span class="GramE"><span style="text-decoration: underline;">Two New SPP Contracts in Operation</span>.</span> Two additional contracts for screening by TSA-selected contractors took effect this fall. In October, Trinity Technology Group took over checkpoint screening at Orlando Sanford Airport. And in November CSS <span class="SpellE">FirstLine</span> took over screening at Bozeman Yellowstone Airport and three other small airports in Montana. These two additions bring the total number of airports with contract screening to 20, including Sarasota, FL, whose contract is not yet in effect. Next up could be Orlando International (MCO), whose decision on whether to apply to TSA's Screening Partnership Program is expected during first-quarter 2015.</p>
<p><span style="text-decoration: underline;">Mitsubishi Group Will Manage Mandalay Airport</span>. A consortium headed by Japan's Mitsubishi has won a 30-year concession to upgrade and manage Mandalay International Airport, the largest airport in Myanmar. The contract will go into effect in March 2015. In addition to operating both the airside and the landside of the airport, the consortium will expand and modernize the terminal. The airport is located 22 miles south of Mandalay, and its longest runway is 14,000 feet.</p>
<p><span style="text-decoration: underline;">GMR Seeking Damages from Maldives Government</span>. In late 2010 a joint venture of India's GMR Infrastructure and Malaysia Airports won a 25-year concession to expand and operate Male International Airport in the Maldives. They had committed to spend $511 million on the project. But soon after the concession took effect, a new government was elected, which sought to renegotiate the deal. With no agreement being reached, in late 2012 the government cancelled the concession, after the companies had invested $230 million. They have sued the government for wrongful termination, seeking a total of $803 million in damages.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Hong Kong Third Runway Approved</span>.</span> With its airport already operating near capacity, the Hong Kong Airport Authority has welcomed the November approval by environmental regulators for its third-runway expansion project. The Department of Environmental Protection granted an environmental permit for the project, provided HKAA complies with all the mitigation measures set out in the Environmental Impact Assessment&mdash;which include creating a 5,928-acre marine park and re-routing ferry routes. The current schedule calls for the new runway to be in full operation by 2023.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Seven Americans Removed from No-Fly List</span>.</span> In October the TSA for the first time removed Americans from its No-Fly list, in compliance with a federal judge's ruling that the previous provisions allowing people to challenge their inclusion on the last were "wholly ineffective." The seven were among 13 people who sued to get off the list, and are being represented by the American Civil Liberties Union. The cases of the other six are to be decided by January.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Voters Side with Opponents of Santa Monica Airport</span>.</span> A ballot measure sponsored by AOPA and NBAA that would have required a popular vote to reduce or eliminate aircraft operations at Santa Monica Municipal Airport failed at the polls last month, garnering only 41% of the votes. That result means decisions over the airport's future will be made by the City Council. But a local government's ability to shut down an airport that has received federal airport grants is constrained by the grant assurances that accompany such grants, and the FAA has repeatedly maintained that the city cannot shut down the airport.</p>
<p><span class="GramE"><span style="text-decoration: underline;">A Second Provider for Runway Anti-Overrun Systems</span>.</span> At airports where there is not space to provide a normal 1,000-foot runway safety area at each end of a runway, the FAA-approved alternative is an engineered material arresting system (EMAS), of which about 90 have been installed at airports around the country and overseas. Until now, the dominant provider has been Zodiac Aerospace, whose EMAS consists of crushable cement blocks. But new-entrant Runway Safe has received approval for a new material: crushable silica foam nuggets. Its first installation will be at Chicago Midway Airport, to replace one of four Zodiac EMAS pads. The concept was researched at the Texas Transportation Institute, with funding from the Airport Cooperative Research Program.</p>
<p><span style="text-decoration: underline;">CLEAR Adds Miami International Airport</span>. Membership-based CLEAR has announced that its services will soon be offered at Miami International Airport (MIA), making it the 11<sup>th</sup> airport where CLEAR is in operation. Members are allowed to bypass regular screening lines, and after verifying their identity at a CLEAR kiosk, go to the head of the line. They then go through regular screening, unless they are also members of TSA's <span class="SpellE">PreCheck</span> program.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Multi-Airport Regions in New ACRP Report</span>.</span> How do airlines decide their operating strategies in urban areas with multiple passenger airports? And how do passengers select an airport in such regions? These questions are explored in a new report from the Transportation Research Board's Airport Cooperative Research Program. "Understanding Airline and Passenger Choice in Multi-Airport Regions" is ACRP Report 98, available on the TRB website.</p>
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<p><strong><a name="g"></a>Quotable Quotes</strong></p>
<p>"The [Wright] Amendment is merely being replaced with a different means of interfering in free commerce. The law that then-President George W. Bush signed in 2006 to rid us of Wright limits DAL [Dallas Love Field] to 20 gates, of which Southwest holds 16. This was the result of a five-party agreement that led to the demolition of 12 gates at Love. It erects a huge roadblock to prospective competitors. Through all this, there has been one interested party that was never at the negotiating table&mdash;'the traveling public.' Wouldn't want those suckers in on the deal. These vestiges of the Wright Amendment reflect nothing more than power politics and the lobbying brawn of two airlines. American doesn't want to see traffic grow at Love Field. Southwest wants its overwhelming dominance of DAL kept intact. How ironic that so many Texans&mdash;those supposed friends of freedom and champions of laissez-faire&mdash;would be mixed up in so much shameless shackling of Adam Smith's invisible hand."<br /> &mdash;Editorial, "Love Lost in Dallas," <em>Aviation Week</em>, Oct. 13, 2014</p>
<p>"I'm hopeful that we will have some more people being enrolled [in <span class="SpellE">PreCheck</span>] through the third-party private sector, which could expand perhaps next year significantly the numbers. Instead of hundreds of thousands it may literally be in the millions&mdash;which we would then need to accommodate by increasing even more the number of TSA <span class="SpellE">PreCheck</span> <span class="GramE">lanes.</span> . . . What I see with the third parties . . . is, can third-party enrollment be a game-changer for the checkpoint of the future? Can we do it in a partnership with the private sector in ways that go beyond our ability, because we have a reduced budget?"<br /> &mdash;John <span class="SpellE">Pistole</span>, TSA Administrator, in "Considering the Year in Airport Security, With the TSA Chief," Joe Sharkey, <em>The New York Times</em>, Dec. 1, 2014</p>
<p><a href="#top">&raquo; return to top</a></p>1014094@http://www.reason.orgThu, 04 Dec 2014 12:55:00 ESTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #102http://www.reason.org/news/show/airport-policy-security-news-102
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">TSA launches private-sector <span class="SpellE">PreCheck</span> recruitment</a></li>
<li><a href="#b">Air fares, deregulation, and airline consolidation</a></li>
<li><a href="#c">How cost-effective is <span class="SpellE">PreCheck</span>?</a></li>
<li><a href="#d">Wright Amendment repeal causes Love Field snafu</a></li>
<li><a href="#e">Will airports succeed in raising the PFC cap?</a></li>
<li><a href="#f">Will London get more airport capacity?</a></li>
<li><a href="#g">Upcoming Event</a></li>
<li><a href="#h">News Notes</a></li>
<li><a href="#i">Quotable Quotes</a></li>
</ul>
<p><strong><a name="a"></a>TSA Launches Private-Sector <span class="SpellE">PreCheck</span> Recruitment</strong></p>
<p>Speaking at a luncheon of the Aero Club of Washington on Sept. 26<sup>th</sup>, TSA Administrator John <span class="SpellE">Pistole</span> announced long-awaited plans to contract with private companies for large-scale marketing to and vetting of potential <span class="SpellE">PreCheck</span> members. As he announced then, the agency followed up with an Industry Day on Oct. 7<sup>th</sup>, with 91 industry people in attendance.</p>
<p>While <span class="SpellE">PreCheck</span> now has nearly 600,000 members, the new effort is aimed at adding millions of low-risk travelers to the program. Factoring in membership in Customs &amp; Border Protection's trusted traveler programs, who gain access to <span class="SpellE">PreCheck</span> lanes, as well as the exemptions for airline crew-members and military personnel, TSA now estimates that half of daily air travelers can bypass regular screening lanes. The program shortens all the screening lines and enables TSA to focus more resources on travelers who have not been pre-vetted as low-risk.</p>
<p>But to increase <span class="SpellE">PreCheck</span> to millions rather than 600,000, the current "retail" recruitment effort aimed at individual travelers is insufficient. Most of its recruiting locations are at places inconvenient for air travelers (such as seaports where other transportation security efforts are located). The idea behind the new large-scale recruitment is to tap private-sector expertise to market the program on a wholesale basis, to employees of larger businesses, trade associations, and other groups. Here is how TSA expects it to work, based on the PowerPoint from their Industry Day meeting.</p>
<p>Qualified companies (which must meet a detailed set of TSA requirements) will be asked to submit detailed proposals to market to, enroll, and pre-screen large numbers of individuals, with TSA making the final eligibility decision. The selection of contractors will proceed in three phases. First, TSA will receive and evaluate proposals from companies that meet a set of requirements. Next, for those that pass muster, TSA will assess the algorithms they plan to use to validate applicants' identity, check their criminal histories for disqualifying events, and perform provisional risk assessments on the applicants. In phase three, TSA will perform end-to-end testing of the company's infrastructure and enrollment methods.</p>
<p>One sticking point for some would-be contractors is a planned requirement to collect fingerprint data, which can only be done in person. The ease of applying entirely online would likely attract far more applicants than a process that requires making an appointment and showing up to be fingerprinted. The president of likely bidder <span class="SpellE">Eid</span> Passport, James <span class="SpellE">Robell</span>, told the <em>Wall Street Journal</em>'s Scott McCartney that&nbsp;the potential market could be 10 million without the fingerprint requirement, but only 10% of that with fingerprinting. <span class="SpellE">Robell</span> said that industry has developed other ways to validate identity without using biometrics. I've also been told that it is possible to do criminal history checks without having a person's fingerprints.</p>
<p>Some other details from the TSA presentation are that applicants will be expected to pay a fee sufficient to cover TSA's processing costs, presumably the same $85 fee for the current recruitment program aimed at individuals (and which does require fingerprinting). Also, TSA stresses that while companies will be free to use commercial databases in their pre-screening, risk assessments may not be based on race, ethnicity, religion, national origin, age, financial status (e.g. credit scores, bankruptcies, or income level), health records, constitutionally protected political activity, or other factors reflecting socio-economic status. For those applicants deemed ineligible as a result of the criminal history check, the contractor must notify the person and provide information on how to apply for redress.</p>
<p>TSA told attendees that they <span class="GramE">will</span> take questions and feedback through the end of October. The Request for Proposals will be released in late November, with proposals due a month later and contract awards in early February. That's more than two years since the agency first began talking with companies like these in January 2013.</p>
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<p><strong><a name="b"></a>Air Fares, Deregulation, and Airline Mergers</strong></p>
<p>Believe it or not, there are still people who think it was a mistake to get the government out of deciding which airlines can fly where, and what they can charge. This is despite the dramatic long-term decrease in inflation-adjusted <span class="GramE">air fares</span> following the Airline Deregulation Act of 1978. That measure, which eventually led to the demise of the Civil Aeronautics Board, ushered in the democratization of air travel, making flying affordable to nearly the entire U.S. population.</p>
<p>Some defenders of regulation may agree with that assessment as being true of the first two decades or so of deregulated air travel, when scores of new entrants tried their hand at providing scheduled service and some incumbents expanded willy-nilly (e.g., <span class="SpellE">Braniff</span>), offering a proliferation of air travel choices across the country. But what of the past 15 years, they will say. Many legacy airlines could not survive a competitive environment and went belly-up&mdash;including such storied names as Eastern, National, Pan American, and TWA. Critics' voices have grown louder in the past decade of mergers, which saw Southwest acquire AirTran, Delta acquire Northwest, Continental and United merge, and most recently American and US Airways merge. What has all that consolidation done to competition&mdash;and hence air fares?</p>
<p>I'm happy to report that thus far there has been no significant resurgence of <span class="GramE">air fares</span>. <em>Aviation Daily</em> in August published a set of tables reporting inflation-adjusted <span class="GramE">air fares</span> from 1995 through 2014. If you plot the average 1<sup>st</sup>-quarter <span class="GramE">air fares</span> for each year of that 20-year period, you will see a steady downward trend, though marked by occasional upward spikes. For 1995, the average was $463, with the lowest fare in this series being $349 in 2009. There has been a slight up-trend since then, with a leveling off in 2013 and 2014 at around $382&mdash;still substantially lower than the $463 of 1995.</p>
<p>Another table listed the change in <span class="GramE">air fares</span> between 2000 and 2014 for each of the top 100 airports. Over this time period&mdash;the consolidation of legacy carriers&mdash;only 16 airports had an increase in their average fare, and these were mostly smaller airports, often dominated by Southwest (Dallas Love, Houston Hobby, Chicago Midway, Burbank, etc.). The 15-year increase among these 16 ranged from a low of 0.3% (Kansas City) to a high of 28.9% (Dallas Love). Among the 84 airports whose <span class="GramE">air fares</span> decreased during this 15-year period, two had decreases in the 50% range, six had decreases in the 40% range, and 14 had decreases of 30-39%.</p>
<p>I'm sure <span class="GramE">number-crunchers</span> could do a lot more with these data than I've done here. But clearly there is no sign that airline consolidation has led to significant increases in <span class="GramE">air fares</span>. Competition still appears to be alive and well in U.S. aviation.</p>
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<p><strong><a name="c"></a>How Cost-Effective Is <span class="SpellE">PreCheck</span>?</strong></p>
<p>Last May I took part in a two-day aviation security conference held at Laurier University in Toronto. <span class="GramE">One of the most impressive presentations was made by Prof. John Mueller of Ohio State University</span>. He and co-author Mark Stewart, whose work I've cited previously in this newsletter, had produced a new assessment of the cost-effectiveness of TSA aviation security policy, this one including an analysis of the agency's <span class="SpellE">PreCheck</span> program.</p>
<p>The presentation in May was based on a preliminary version of a paper that has subsequently been revised and submitted for publication in a forthcoming special issue of the <em>Journal of Air Transport Management</em>. What I'm giving you here is a preview of this important paper, "Responsible Policy Analysis in Aviation Security, with an Evaluation of <span class="SpellE">PreCheck</span>."</p>
<p>Before getting into their work on <span class="SpellE">PreCheck</span>, Stewart and Mueller provide what amounts to a primer on aviation security risk analysis, including very useful data on the cost per life saved for a large number of federal safety regulations (for context), and an assessment of what levels of risk are generally considered acceptable in other areas of life. They show how to apply cost-benefit analysis to aviation security and review some of their prior research that found some security measures (such as strengthened cockpit doors and armed pilots) to be cost-effective and others (such as Federal Air Marshals) to be decidedly not cost-effective.</p>
<p>The core of the paper is their application of this methodology to <span class="SpellE"><span class="GramE">PreCheck</span></span>. Their basic analysis begins with the current information that <span class="SpellE">PreCheck</span> lanes are available to 50% of daily passengers. They compare the current situation of <span class="SpellE">PreCheck</span> to the situation before its implementation, making defensible assumptions about the program's accuracy in identifying and shifting low-risk passengers to the expedited lanes. They find that this change leads to only a tiny difference in the overall effectiveness of airport screening (either plus or minus depending on assumptions) but produces large co-benefits in terms of passenger time savings and increased airline revenue, estimated to be worth $2 billion a year with 50% of daily passengers using <span class="SpellE">PreCheck</span> lanes, vastly exceeding a worst-case cost of $50 million a year if screening effectiveness is slightly reduced. And there is a plausible case that overall screening effectiveness will be increased, as TSA focuses more resources on the non-low-risk passengers in the regular lanes.</p>
<p>The Cato Institute has published a version of the basic paper, minus the <span class="SpellE">PreCheck</span> analysis, but including a no-equations version of the risk assessment and cost-benefit principles. It includes tables on regulatory expenditures per life saved and comparisons of annual fatality risks that put aviation security risks in perspective. (See Quotable Quotes in this issue for a citation of that paper.)</p>
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<p><strong><a name="d"></a>Wright Amendment Repeal Creates Love Field Snafu</strong></p>
<p>Eight years ago the key stakeholders involved in the federal regulation that limited Dallas Love Field air service to flights to adjacent states (the Wright Amendment) reached agreement on phasing out that anti-competition measure. American, Southwest, DFW Airport, and the cities of Dallas and Fort Worth all agreed that the restrictions would be phased out over eight years, ending this month. But in exchange, the number of gates at Love Field would be slashed, from 32 to 20, and international service would be banned. Those provisions are included in the federal statute that phased out the Wright Amendment&mdash;and going forward, they will continue to thwart meaningful competition at the airport.</p>
<p>Of the 20 gates, 16 are leased to Southwest on an exclusive-use basis. Two formerly held by American were divested, per the Justice Department's antitrust conditions on the American/US Airways merger, to Virgin America. And United, which had subleased one of its gates to Delta, has decided to expand at Love Field and has asked the City of Dallas to kick Delta out, which the City has done. Delta has cried foul, accusing United of hogging its gates, citing UA's planned tripling&mdash;from 30 minutes to 90 minutes&mdash;of the turnaround time on its flights to and from its Houston (IAH) hub.</p>
<p>Clearly, the City of Dallas is sitting on a valuable asset, for which demand is greater than its current 20-gate capacity. A rational airport owner would add gates and seek authorization to add international service facilities as part of that expansion, just as Houston has done with Southwest's base at Hobby Airport. But with the current five-party agreement enshrined in federal statute, is there any hope of changing this ridiculous status quo?</p>
<p>Mitchell <span class="SpellE">Schnurman</span>, business columnist for the <em>Dallas Morning News</em>, suggested to me that the original purpose of the Wright Amendment&mdash;to protect the fledgling DFW Airport from local competition&mdash;became an anachronism and that the five-party settlement remains one, due to DFW's continued growth and success. American is fat and happy as the dominant carrier at DFW. So might those two key <span class="GramE">stakeholders</span> support eliminating the successor restrictions on Love Field? Were such an effort to get under way, nearly everyone assumes that Southwest&mdash;in the catbird seat at Love Field&mdash;would lobby fiercely to retain the 20-gate status quo.</p>
<p>I'm not so sure that's the case. Think back to what happened at Houston Hobby (HOU) in 2012. Southwest engaged in a major lobbying battle to remove the ban on international flights at Hobby, over the fierce objections of United, which fought to protect its international service at Houston Intercontinental. But ultimately the City of <span class="GramE">Houston &nbsp;decided</span> in favor of international service at HOU, and the new international terminal is now under construction. Southwest has ambitious plans to serve cities in Mexico and elsewhere from HOU. They might decide that comparable service out of Love Field makes equally good sense.</p>
<p>With an international terminal at Love Field as the carrot, and DFW and American not opposed, Southwest could decide in favor of scrapping the current restrictions at Love Field&mdash;and presumably the two cities would then go along. But if any such deal materializes, all new gates added at Love should be common-use gates, offering the maximum opportunity for competition. And as existing exclusive-use leases expire, the city should convert them to common-use, as well.</p>
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<p><strong><a name="e"></a>Will Airports Succeed in Raising the PFC Cap?</strong></p>
<p>With next year bringing a new FAA reauthorization bill, airport groups ACI-NA and AAAE are revving up a renewed campaign to increase the federal cap on what airports can charge passengers for local airport capital improvements. This local fee is called a passenger facility charge (PFC). Until 1990, airports were not allowed to levy such fees, due to a federal statute called the Anti-Head Tax law. But in that year Congress overcame intense airline lobbying to allow airports to impose up to $3 per passengers for specific capital improvement projects, both airside (runways, taxiways, etc.) and landside (terminals and security facilities, mostly). The money can be spent only on projects approved by the FAA.</p>
<p>Congress increased the cap to $4.50 per passenger in 2000, but if you use the <em>Engineering News-Record</em> construction cost index to assess the PFC's purchasing power, by next year it would need to be about $8.50 to buy as much as it did in 2000, according to ACI-NA. So the airport groups are pushing for an increase in the cap to $8.50, with inflation indexing going forward from there.</p>
<p>Airlines continue to oppose PFCs, despite acknowledging the need for investment in airport infrastructure. They say they would rather pay for such costs via increases in the landing fees and space rentals they pay to airports. They also argue that any increase in per-passenger charges will depress the demand for air travel&mdash;though that hasn't stopped airlines in recent years from imposing a wide array of mandatory and optional "ancillary charges" that add to total ticket prices but escape the 7.5% airline ticket tax because they are not an official part of the fare.</p>
<p>The airport groups hope to succeed by debunking airline characterization of an increase in the federal cap on PFCs as "a federal tax increase." That's a gross distortion of reality, since the federal government does not levy or collect <span class="SpellE">PFCs.</span> And airports select the amount of their individual PFC based on the financing plan they have worked out for a given set of airside and landside capital investments. (Note: the PFC revenue stream is <span class="GramE">bondable</span>, making it a powerful financing tool.)</p>
<p>There is a separate program of federal grants for airports: the Airport Improvement Program (AIP). Its future is somewhat <span class="GramE">uncertain,</span> given the eight more years of the federal budget sequester still to come. Last year saw the funds to reverse air traffic controller furloughs and re-open contract towers diverted from the AIP budget, and with the likely shrinkage of general fund support for FAA's budget (in recent years, between 20 and 30% of the total), further reductions in AIP are likely. Moreover, like all federal grant programs, AIP imposes numerous conditions and restrictions on airports.</p>
<p>So it would make sense, both for airports and for Congress, to transition airports from dependence on federal grants to <span class="GramE">more-robust</span> local funding. Greater use of PFCs would be a powerful way to do that. Several years ago, a majority of the 29 U.S. large-hub airports offered to give up their AIP grants in exchange for removal of the federal cap on their <span class="SpellE">PFCs.</span> An April 2013 letter to the House and Senate budget committees from the operators of 20 of those airports estimated that this expanded local self-help would reduce AIP spending by $4.2 billion over 10 years.</p>
<p>The airport groups are right to talk about PFCs as local self-help--not federal taxes-- because that is what PFCs are. But I think they are making a mistake in not appealing to fiscal conservatives and other budget hawks by proposing reductions in AIP (except for non-commercial airports) in exchange. There is growing interest in Congress in selectively reducing the federal role, devolving more responsibility to state and local governments. The case for PFCs could fit right into this emerging trend.</p>
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<p><strong><a name="f"></a>Will London Remain Competitive for Air Service?</strong></p>
<p>Europe has a number of major hub airports today, including Amsterdam, Frankfurt, London, and Paris. Amsterdam has five airline runways and one GA runway, and is expanding its terminal capacity. Frankfurt recently completed its fourth runway, and has received planning permission to add a new Terminal 3. And Charles de Gaulle in Paris has four runways and ample capacity. London Heathrow has only two runways and London Gatwick only one.</p>
<p>Of the four mega-cities, only London has been constrained for several decades by political opposition to adding any runway capacity at either Heathrow or Gatwick. Last year politicians created an independent Airports Commission to take a fresh look at the options, and on Sept 1<sup>st</sup> it rejected the outlandish ($100-150 billion) proposal to build a replacement for Heathrow in the Thames estuary. Conventional wisdom now expects the Commission to recommend the addition of one runway for <em>either</em> Heathrow or Gatwick by its next-summer deadline, after which the ball will be back in Parliament's hands.</p>
<p>The conventional wisdom also says that only one airport in Britain can be a major international hub, and that airport must be Heathrow. The assumption here is that airlines would not support two airports in the same urban mega-region with serious international service. But London is not just any urban mega-region. It is comparable in wealth and impact to New York and Tokyo, each of which has two international hub airports&mdash;JFK and Newark in one case, <span class="SpellE">Haneda</span> and Narita in the other. It is up to individual airlines to decide whether to build a major hub at only one, or to split their service between two.</p>
<p>Thanks to the recent breakup of the former BAA, Heathrow and Gatwick now have separate ownership, and each seeks to add a runway in order to expand its business. This kind of competition is a positive thing. It will foster innovation in figuring out how to compensate airport neighbors for the land acquisition and noise impacts that accompany runway additions, as well as innovation in each airport's marketing outreach to airlines. The idea that there is "one best way" for airports to evolve in Britain is a <span class="GramE">hold-over</span> from the days of central planning, when (in Europe) airlines and airports were state-owned. In today's deregulated aviation market, with poorly run airlines shrinking or disappearing and new ones unexpectedly emerging into powerhouses (Emirates), aviation central planning is a fool's errand.</p>
<p>If Heathrow and Gatwick were <em>both</em> given planning permission to add runway capacity, the outcome could be that one or both succeed, needing to absorb the costs of making this expansion tolerable to their neighbors. The <span class="GramE">future shape of air service to Southeastern England would then be determined by the dozens or hundreds of airlines that would make service decisions in response to the added capacity</span>. Depending on what those airlines decide makes sense for <span class="GramE">them,</span> the outcome could be a two-international-hub situation like New York and Tokyo or a mega-hub plus secondary airports as in Dallas, Houston, Los Angeles, Miami, Paris, San Francisco, Seoul, Sao Paulo, and Washington, DC.</p>
<p>I don't have the knowledge or wisdom to define one such outcome as optimal, and neither does the Airports Commission, the Confederation of British Industry, the Airport Operators Association, or the British Parliament.</p>
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<p><strong><a name="g"></a>Upcoming Event</strong></p>
<p><em>Note: I don't have space to list all aviation conferences that might be of interest. Hence, only conferences where someone from Reason Foundation is speaking are listed in this section.</em></p>
<p><span style="text-decoration: underline;">Fourth Annual AAAE/<span class="SpellE">LeighFisher</span> Global Airport Public-Private Partnership Conference</span>, Nov. 5-6, St. Regis Hotel, Washington, DC (Robert Poole speaking). Details at: <a href="http://www.events.aaae.org/sites/14071">www.events.aaae.org/sites/14071</a></p>
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<p><a name="h"></a><strong>News Notes</strong></p>
<p><span class="GramE"><span style="text-decoration: underline;">Orlando Sanford Switching to Private Screening</span>.</span> TSA has approved the request of Orlando Sanford International Airport to switch from TSA screening to <span class="GramE">private-sector</span> screening, effective early next year. TSA has selected Trinity Technology Group for a $24 million six-year contract, under the agency's Screening Partnership Program (SPP). The contractor must offer screening positions to the 200 TSA screeners now working at the airport; those who do not sign up may apply for other government positions or retire. The much larger Orlando International Airport is still studying whether to apply for SPP.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Santa Monica Airport on November Ballot</span>.</span> Voters in Santa Monica, CA face a ballot measure next month that would require a public vote before city officials could shut down or reduce the size of the Santa Monica Municipal Airport. Local aviation businesses, along with AOPA and NBAA, turned in petitions with nearly 16,000 signatures to get the measure onto the ballot. In parallel with this effort, airport tenants and aviation groups in July filed a complaint with the FAA, taking issue with the City's legal position that it can shut down the airport. Under the terms of FAA grant assurances, an airport's use cannot be changed during a 20-year period after receipt of a grant, and the last such grant to Santa Monica took place in 2003.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Santiago Airport Bids Delayed</span><em>.</em></span><em> Public Works Financing</em> reports that proposals from the private sector for a 20-year, $700 million concession to double the Santiago, Chile airport's capacity will now be due November 30<sup>th</sup>, to give bidders more time to prepare their proposals. At least five teams are expected to bid to build a new 200,000 square meter international terminal and upgrade the domestic terminal. The winner will be the team that offers the government the largest share of net airport revenue.</p>
<p><span class="GramE"><span style="text-decoration: underline;">TSA to Test Electronic ID Checking</span>.</span> A system called Electronic Credential Authorization Technology (E-CAT) will be tested this fall at TSA's Transportation Systems Integration Facility at Reagan National Airport (DCA). The aim of the system is to speed up and improve the verification of each passenger's government-issued identification at the beginning of the checkpoint screening process. The $85 million contract was awarded to <span class="SpellE">MorphoTrust</span>.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Third Chicago Airport Project Tests Industry Interest</span>.</span> The long-discussed South Suburban Airport at Peotone, IL moved a step closer to realization last month as Illinois DOT held an "industry day" to explain the project and assess private-sector interest. About 150 people attended the Sept. 23<sup>rd</sup> event. IDOT in August had issued a Request for Information on the possible development of the airport as a public-private partnership. In June IDOT purchased 288-acre <span class="SpellE">Bult</span> Field, a general aviation airport adjacent to the bulk of the land the agency has acquired in bits and pieces in recent decades. The project has been discussed for nearly 40 years, and the <em>Chicago Tribune</em> editorialized on Aug. 25<sup>th</sup> that it is time to either build the airport or scrap the project.</p>
<p><span class="GramE"><span style="text-decoration: underline;">New Investment in London <span class="SpellE">Luton</span> Airport</span>.</span> The <span class="SpellE">Luton</span> Borough Council gave planning permission this summer for a $172 million project to expand the privatized airport's annual passenger capacity from 12 million to 18 million. <span class="SpellE">Luton</span> Airport, in London's northern exurbs, is owned by Spanish airport operator <span class="SpellE">Aena</span> and investment fund <span class="SpellE">Ardian</span>. It is an important base for low-cost carrier EasyJet, which welcomed the announced expansion.</p>
<p><span class="GramE"><span style="text-decoration: underline;">New Runway Opened at Fort Lauderdale</span>.</span> Newly lengthened runway 10R-28L opened to air traffic on Sept. 17<sup>th</sup>, replacing a prior general aviation runway (9R-27L) on the south side of the airport. The project was held up for many years over the increased noise impact on residential areas just south of the airport. The final compensation agreement, approved by the FAA, offers market-value buyouts to some homeowners and extensive <span class="GramE">sound-proofing</span> to others.</p>
<p><span style="text-decoration: underline;">House Unanimously Votes to Reduce New TSA Security Fees</span>. Last month the U.S. House of Representatives voted to clarify its intent in having previously approved a change in the structure of TSA security fees. A 2013 budget resolution had replaced the previous $2.50 per segment fee (with a cap of $10 per round trip) with a $5.60 fee per one-way trip. But TSA interpreted multi-segment trips with long layovers as separate trips, each subject to a $5.60 fee. The House bill clarifies congressional intent by spelling out that the $5.60 per one-way trip means a maximum of $11.20 per round trip, regardless of the length of connect time. Left unaddressed by the bill is the diversion of a portion of the revenue to deficit reduction, rather than to the budget for TSA screening.</p>
<p><span class="GramE"><span style="text-decoration: underline;">New Guidebook on Through-the-Fence Operations</span>.</span> The Airport Cooperative Research Program, run by the Transportation Research Board, recently released ACRP Report 114, "Guidebook for Through-the-Fence Operations." It covers financial, operational, legal, and other issues. It can be downloaded from the TRB website or purchased in hard-copy form. (<a href="http://www.trb.org/main/blurbs/170955.aspx">www.trb.org/main/blurbs/170955.aspx</a>)</p>
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<p><strong><a name="i"></a>Quotable Quotes</strong></p>
<p>"One of the biggest improvements and the biggest area of hope for me is this move to risk-based security. Getting folks through expedited screening because we know who they are is very important, not just for commerce . . . because it makes it easier for us to fly and travel . . <span class="GramE">.&nbsp; because</span> when we actually are taking the people we know out of the mix, what we're left with is people we don't know&mdash;and that's where the threat comes from."<br /> &mdash;Rep. Richard Hudson (R, NC), chairman of the Homeland Security Committee's Subcommittee on Transportation Security, quoted in Tom Curry, "Hudson Urges TSA to Move Faster on Expedited Screening for Low-Risk Flyers," <em>Roll Call</em>, Sept. 10, 2014</p>
<p>"DHS decision-makers do not follow a robust risk assessment methodology. If they did, low-cost solutions that are easily deployed and effective would be the first to be implemented, and we do not find that to be the standard. <span class="GramE">That observation is supported by a committee of the U.S. National Academy of Sciences in a 2010 report</span>. After spending the better part of two years investigating the issue, the committee could not find 'any DHS risk analysis capabilities and methods' adequate for supporting the decisions made about spending on terrorism and noted that 'little effective attention' was paid to 'fundamental' <span class="GramE">issues.</span> . . . As far as we can tell, the report, which essentially suggests that DHS had spent hundreds of billions of dollars without knowing what it was doing, generated no coverage in the media whatsoever."<br /> &mdash;John Mueller and Mark G. Stewart, "Responsible Counterterrorism Policy," Policy Analysis No. 755, Cato Institute, September 10, 2014</p>
<p>"One of the things we need to do is reposition what the PFC is. Opponents of the PFC have convinced Congress that it is a tax. ACI-NA has the challenge to make our case to Congress that it is not a tax, but a necessary local user fee. We need to build a coalition that understands the importance that raising the PFC is vital to the economic viability of an airport&mdash;that the strong airport is essential to a strong local economy and a generator of jobs. The PFC is also critical to ensuring that airports can handle tomorrow's air traffic."<br /> &mdash;Kevin Burke, ACI-NA, quoted in Tom Smith, "Burke Makes Progress in First 100 Days at ACI-NA," <em>Centerlines</em>, March 2014</p>
<p><a href="#top">&raquo; return to top</a></p>1014047@http://www.reason.orgThu, 09 Oct 2014 20:06:00 EDTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #101http://www.reason.org/news/show/airport-policy-security-news-101
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">TSA planning major <span class="SpellE">PreCheck</span> expansion</a></li>
<li><a href="#b">New competition for one-airport cities</a></li>
<li><a href="#c">Some progress on private airport screening</a></li>
<li><a href="#d">Global airport privatization continues</a></li>
<li><a href="#e">Airlines challenge new TSA passenger tax</a></li>
<li><a href="#f">Miami Airport City a victim of politics</a></li>
<li><a href="#g">News Notes</a></li>
<li><a href="#h">Quotable Quotes</a></li>
</ul>
<p><strong><a name="a"></a>Pistole</strong><strong> Promises Major Expansion of <span class="SpellE">PreCheck</span></strong></p>
<p>At the Aspen Institute's Aspen Security Forum last month (July 24<sup>th</sup>), TSA Administrator John <span class="SpellE">Pistole</span> reported some of the benefits achieved thus far by the agency's most visible risk based security initiative, <span class="SpellE">PreCheck</span>. But he also told attendees that a major expansion is in the works, via recruitment by third-party vendors.</p>
<p>Interviewed by Fox News's Catherine Harris, <span class="SpellE">Pistole</span> said that <span class="SpellE">PreCheck</span> is now in place at just about all the airports where there is enough passenger volume to make it viable and capital and bridge disbursements per mile 118 airports, with over 400 <span class="SpellE">PreCheck</span> lanes in place. Thanks to separating low-risk <span class="SpellE">PreCheck</span> members from the regular lanes (and doing likewise for over 250,000 cabin and cockpit crewmembers), TSA has 7% fewer employees than a year ago. And thanks to the efforts of its recruitment contractor, <span class="SpellE">Morpho</span> Trust, there are now 26 on-airport and 275 off-site locations where travelers can apply for membership in <span class="SpellE">PreCheck</span>. (That is well short of the 41 on-airport sites <span class="SpellE">Morpho</span> had planned to be in operation by mid-year.) <span class="SpellE">Pistole</span> said that as of March, over 400,000 people had been signed up via that program.</p>
<p>In response to Harris's question about expanded third-party recruitment (a topic I've followed in this newsletter), <span class="SpellE">Pistole</span> said that "To really make <span class="SpellE"><span class="GramE">PreCheck</span></span> a game-changer for us," the key will be to go beyond individual sign-ups (the "retail" approach). The planned third-party enrollment effort will use pre-qualified private consortiums to recruit <span class="SpellE">PreCheck</span> members on a "wholesale" basis. They would be able to work with employers and industry to review large numbers of applicants, using each consortium's TSA-approved algorithms to assess their low-risk status. The consortium would then submit a <span class="GramE">file</span> of people it has cleared to TSA for final vetting. Asked how soon we can expect this to begin, <span class="SpellE">Pistole</span> hesitated and then replied that he hopes to be announcing something in the not too distant future. You can view <span class="SpellE">Pistole's</span> interview at the Aspen event on YouTube: <a href="https://www.youtube.com/watch?v=hvVAgbyTqeA">https://www.youtube.com/watch?v=hvVAgbyTqeA</a></p>
<p><em>New York Times</em> columnist Joe Sharkey interviewed <span class="SpellE">Pistole</span> (Aug. 4<sup>th</sup>) and reported that on July 24<sup>th</sup> slightly more than 1 million of that day's 2.1 million passengers received some form of trusted-traveler expedited screening and capital and bridge disbursements per mile <span class="SpellE">PreCheck</span>, Global Entry, military or other. With the current and planned growth of <span class="SpellE">PreCheck</span> (via third-party enrollment), <span class="SpellE">Pistole</span> said TSA will be cutting back on the number of "random, managed-inclusion" passengers diverted into <span class="SpellE">PreCheck</span> lanes despite not being members. That will be a boon to <span class="SpellE"><span class="GramE">PreCheck</span></span> members and a further boost to airport security.</p>
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<p><strong><a name="b"></a>Possible New Competition in Monopoly-Airport Metro Areas</strong></p>
<p>Of America's 15 largest metro areas (Metropolitan Statistical Areas), only five are served by a single commercial airport: Atlanta, Detroit, Philadelphia, Riverside/San Bernardino, and Seattle. The largest, New York, is served by six, and Los Angeles/Orange County by four. Baltimore/Washington and Miami have three, and <span class="GramE">six others are served by two</span>. But efforts are under way in both Atlanta (#9) and Seattle (#15) to add commercial service at existing general aviation airports. Though not, of course, without a fight.</p>
<p>In Seattle, Paine Field in Everett (a northern suburb) serves both general aviation and Boeing's huge Everett assembly plant. Airport officials have been interested in bringing commercial airline service to Paine Field for several years, and both Alaska and Allegiant have expressed interest in providing such service. A three-year FAA study (released in 2012) found that adding such service would have no significant adverse impact on the surrounding area. But some local residents and public officials differ with that finding, and have a case pending before the Ninth Circuit Court of Appeals. If they win, FAA would have to do a more detailed analysis.</p>
<p>If the project goes ahead, Propeller Airports has offered to build a commercial terminal at Paine Field. It would invest its own funds in creating the terminal and parking facilities, as well as paying rent to Snohomish County, the airport owner. In return, <span class="SpellE">Propellor</span> would seek a return on its investment from various charges to airlines and passengers. Its letter of intent was submitted to the County on June 16<sup>th</sup>, and has received the endorsement of Everett Mayor Ray <span class="SpellE">Stephanson</span>. The longest runway at Paine Field is 16R/34L at 9,100 feet, providing ample length for the narrow-body jets most likely to be used for commercial service there.</p>
<p>Meanwhile, Propeller continues working with Paulding County in the suburbs of Atlanta, which seeks to attract airline service to its Silver Comet Airport as an alternative to giant Hartsfield-Jackson International Airport, Delta's largest hub. On June 30<sup>th</sup>, the county won a unanimous decision in the Georgia Supreme Court that Paulding County's recent bond issuance for airfield improvements met all legal requirements. The FAA is doing an environmental study on the potential impacts of commercial service at the airport (similar to what it did for Paine Field), and has received "dozens of comments." The National Park Service expressed concern about the "acoustic environment and soundscapes" at Kennesaw Mountain National Battlefield Park, and the Fish and Wildlife Service asked the FAA to include possible impact to the Cherokee darter, a small fish. City of Atlanta COO Michael <span class="SpellE">Geisler</span> said that commercial service at Paulding's airport "has the potential to dramatically impact the environmental, airspace, noise, and commercial landscapes in the Atlanta metropolitan area, without any demonstrated need or benefit."</p>
<p>All the same environmental impacts could be raised and capital and bridge disbursements per mile at several orders of magnitude larger scale and capital and bridge disbursements per mile against Hartsfield-Jackson itself. But more fundamentally, in America's deregulated aviation system, there is no legal requirement for anyone to demonstrate a "need" for competitive airline service. It is a presumption of the 1978 Airline Deregulation Act that competition is good for air passengers. If Paulding County and Propeller Investments are willing to risk their own funds on providing the facilities needed for a competitor to Hartsfield-Jackson and Delta, there should be no legal obstacle to their doing so.</p>
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<p><strong><a name="c"></a>Modest Progress on Outsourced Checkpoint Screening</strong></p>
<p>Two more airports have been approved to participate in TSA's Screening Partnership Program (SPP): Orlando-Sanford and Sarasota, both in Florida. When TSA screeners move out and a TSA-certified contractor moves in this <span class="GramE">fall, that</span> will bring the total number of SPP airports to 20. Still studying the question is Orlando International, which is awaiting the results of a study <span class="GramE">it</span> commissioned from McKinsey &amp; Co. on ways to improve the air traveler experience at the airport.</p>
<p>In 2012's FAA reauthorization law, Congress included requirements that TSA streamline the process under which airports can apply to participate in SPP. But at a July 29<sup>th</sup> hearing of the House Homeland Security transportation subcommittee, Chairman Richard Hudson (R, NC) expressed dismay at how TSA is implementing the law's provisions. And he had witnesses to back him up. The legislation requires TSA to approve all applications (consistent with the original 2001 legislation creating TSA and the opt-out provision) unless TSA can show that doing so would decrease security or increase costs. But TSA's revised process puts the burden of proof on the airport applicant to demonstrate those things.</p>
<p>Moreover, the agency's latest cost comparison claims to show that there is only a difference of 0.2% between the cost of TSA and contractor screening. While the details of that cost analysis have not been made public, security companies point out that the TSA "cost" excludes various overhead items, in particular retirement benefits which are not included in TSA's budget because they are handled by the federal Office of Personnel Management. The claim of no cost savings is also belied by the empirical comparison of the cost of TSA screening at LAX and contract screening at SFO, carried out by staff researchers of the House Transportation &amp; Infrastructure Committee in 2011. Those analysts applied the SFO contract cost model to the larger volume of screening at LAX and estimated that switching LAX to contract screening would reduce the annual cost at LAX from $90.7 million to $52 million, a 43% saving.</p>
<p>Yet J. David Cox, president of the American Federation of Government Employees, which represents TSA screeners, claimed in his testimony that SPP screeners "save no taxpayer money. But they are paid less than their federally-employed counterparts and receive inferior benefits." If Cox and AFGE had any evidence to back up those claims, they would have a solid legal case, since the 2001 law <em>mandates</em> that TSA-approved screening companies pay the same screener wages and benefits as TSA. Yet no such lawsuit has ever been filed.</p>
<p>TSA's SPP director William Benner listened to complaints about the four-year application process that the Glacier Park, MT airport had to live through, and Kansas City's four-year contract dispute that has held up renewing that airport's long-standing SPP contact. He said the agency's goal is to shorten the approval process to one year: "That is a very aggressive timeline," he told the subcommittee.</p>
<p>It's frustrating that the highly competent and well-respected Government Accountability Office has still not done its own, arm's-length cost comparison and capital and bridge disbursements per mile not just of line-items in TSA's budget but of its total screening costs, to compare with the cost of SPP contract service. If there are serious methodological flaws in the T&amp; I Committee's LAX vs. SFO comparison, the aviation security community needs to know about them. But if those results are actually in the right ballpark, the debate on cost savings should be over.</p>
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<p><strong><a name="d"></a>Global Airport Privatization Wave Continues</strong></p>
<p>The last few months have seen a number of significant airport privatization developments, with large-scale programs announced in Greece and Spain, and a number of privatized terminal projects announced in the Western Hemisphere.</p>
<p>The biggest news was Spain's mid-June announcement that it will sell to investors 49% of state-owned AENA <span class="SpellE">Aeropuertos</span>, which owns all of the country's 46 commercial airports and two heliports. The privatization will have two parts, with 28% of the shares offered to investors via an initial public offering and another 21% offered to strategic investors via a competitive bidding process. The sales are expected to take place by November. A new airport regulatory framework will also be established. AENA <span class="SpellE">Aeropuertos</span>, the world's largest airport group, has been estimated as having a market value of $21 billion.</p>
<p>The Greek government is doing something similar. Its Hellenic Republic Asset Development Fund announced that 37 state-owned regional airports <span class="GramE">will</span> be privatized under 30-year concessions. Two packages of airports are being offered, each including seven core airports. <em>Inspiratia Infrastructure</em> reported last month that HRADF is currently assessing binding bids, with the assistance of a team of technical and financial advisors that include Citigroup Global Markets and Lufthansa. Greece is also seeking bids to finance, develop, and operate a new $1 billion airport at Heraklion, with a bid deadline of November 11<sup>th</sup>.</p>
<p>The French government last month announced that it <span class="GramE">will</span> sell a 49.99% stake in state-owned Toulouse-<span class="SpellE">Blagnac</span> Airport in southwestern France. The national government owns 60% of the airport, with another 25% owned by the Toulouse Chamber of Commerce. There has been talk of similar privatizations of the Lyon and Nice airports.</p>
<p>The only negative privatization news I've seen from Europe was the decision by Slovenia's Prime Minister, shortly before the July 13<sup>th</sup> elections, to suspend privatization of 15 assets, including the country's international airport in Ljubljana. The plan had been to offer 75.5% of the airport, and expressions of interest were solicited back in March.</p>
<p>Three Western Hemisphere developments signal no waning of airport privatization on this side of the Atlantic. The Peruvian government has awarded a 40-year concession to the <span class="SpellE">Kunter</span> <span class="SpellE">Wasi</span> consortium to design, finance, build, and operate a replacement airport for tourist city Cuzco. The consortium is a joint venture of Argentina's <span class="SpellE">Corporacion</span> America and <span class="SpellE">Andino</span> Investment Holdings. The airport is expected to cost $538 million to build, on a <span class="GramE">greenfield</span> site 29 km from Cuzco, the jumping-off point for tourists to the Inca ruins at Machu Picchu.</p>
<p>Mexico appears to be getting close to going forward with a $9.2 billion replacement for the country's largest airport, Benito Juarez serving Mexico City. The master plan developed by consulting firm Arup calls for four runways and one terminal with a capacity of 30 million annual passengers, to be completed by 2018. The ultimate plan would have six runways and two terminals, to accommodate 60 million passengers by mid-century. Given the huge cost of the airport, some form of privatization or public-private partnership arrangement is likely.</p>
<p>Finally, the Jamaican government is moving forward with a 30-year concession to modernize its second-largest airport, Norman Manley International, serving the capital city of Kingston. The privatization would follow the model used a decade ago to modernize Sangster International Airport in Montego Bay, the country's primary tourism airport. Submissions were due July 30<sup>th</sup>, with the goal of awarding the concession in 2015.</p>
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<p><strong><a name="e"></a>Airlines Challenging TSA Passenger Fees in Court</strong></p>
<p>Two airline trade groups and capital and bridge disbursements per mile Airlines for America (A4A) and International Air Transport Association (IATA) and capital and bridge disbursements per mile have filed suit in the U.S. Court of Appeals for the D.C. Circuit, arguing that TSA has gone beyond what Congress approved in revising the passenger security fee. They have asked the court to review the TSA's interpretation of what Congress enacted earlier this year.</p>
<p>What the House and Senate thought they had done was to replace the previous security tax of $2.50 per flight segment (with a maximum of $5.00 for a one-way trip) with $5.60 for each one-way trip, regardless of the number of segments. Sen. Patty Murray (D, WA) who chairs the Senate Budget Committee and Rep. Paul Ryan (R, WI) who chairs the House Budget Committee sent a letter to TSA Administrator John <span class="SpellE">Pistole</span> on May 6<sup>th</sup> objecting to TSA's interpretation. The agency's background material shows that a multi-stop trip could incur <span class="GramE">as much as $33.60 (representing six one-way trips, if the time between segments exceeds four hours on each of two stops on the outbound and return trips), since the former $10 per trip cap is no longer part of the revised legislation</span>. Whether this is due to sloppy drafting of the legislation or TSA making a revenue-maximizing interpretation of the provision remains to be seen.</p>
<p>But I think passengers and the airlines have a more serious complaint about what Congress itself did in revising the law. Congress routed a large portion of the increased revenue generated by the increased security tax to the federal general fund, for deficit reduction, rather using it to cover a larger fraction of TSA's costs. That means this is a <em>real</em> tax on airline passengers, rather than a <em>user tax</em> like most of the other taxes imposed on U.S. aviation. There is no good reason to single out air travelers for the purpose of deficit reduction. Money for the general fund should be coming from general taxpayers, not from a single segment of the population.</p>
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<p><strong><a name="f"></a>Miami Airport City Project a Victim of Politics</strong></p>
<p>In the May 2013 issue of this newsletter, I wrote about an ambitious public-private partnership proposed by Miami International Airport. Called Airport City, its 33 acres would include a business park and hotel, a major Four Diamond hotel with conference center, and a convenience center for employees. Winning bidder <span class="SpellE">Odebrecht</span> USA would invest about $500 million in the project, hoping to generate enough revenues from the multiple uses to pay rent to Miami-Dade County for 40 years and still make a good profit. But as of last month, it looked as if the project was on the way to being abandoned.</p>
<p>The sticking point remains the fact that a sister division of the Brazilian-headquartered company is building a new seaport project in Cuba. That so enraged a portion of Miami's Cuban-American community that the legislature passed a law to forbid the state and its local governments from contracting with any company doing business in Cuba and capital and bridge disbursements per mile a law that was promptly ruled unconstitutional. But rather than simply abandoning the project (or paying <span class="SpellE">Odebrecht</span> a termination fee), the County government has put Airport City through the death of a thousand cuts over the past year, continually downsizing the project first to nine acres for just one hotel and the shopping center, more recently to just the hotel, and now the Airport Department suggests that it may develop the hotel itself.</p>
<p>Odebrecht USA president Gilberto <span class="SpellE">Neves</span> in early July sent County Commissioners a letter expressing great frustration over this drawn-out process, without any votes on how to resolve the issue. He pointed out that over the past six years, the company has spent $11 million on the project, on the basis of being selected as the winning bidder and a handshake that the deal would <span class="GramE">proceed</span>. The FAA had approved the original Airport City plan in early 2013, but the County has never submitted the <span class="GramE">down-sized</span> plan to the agency for review. <span class="SpellE">Neves</span> said the company "may seek reimbursement of its costs and damages."</p>
<p>In a Viewpoint piece in <em>Miami Today</em> (week of July 17<sup>th</sup>), Michael Lewis pointed out the harm this long-running circus is doing not just to <span class="SpellE">Odebrecht</span> but to the county government itself: "If the county jerks vendors around, changes its mind, and renegotiates 'final' deals, good firms won't bid. That costs taxpayers money. Prices [will] rise even further as companies that do seek county work assess delays and the possibility that after spending to reach a deal, the county will dump the project. If you bid at all, you'll seek well above market rates."</p>
<p>It's this kind of awful politicization of what should be a business deal that reinforces my view that U.S. airports need to be de-politicized, via corporatization or privatization.</p>
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<p><a name="g"></a><strong>News Notes</strong></p>
<p><span class="GramE"><span style="text-decoration: underline;">San Juan Airport's $200 Million Renovations</span>.</span> Somewhat more than a year after its privatization via a 40-year concession agreement, San Juan airport's new operator, Aerostar Airport Holdings, conducted a media tour last month to showcase the under-way projects to renovate two aging terminals. The $200 million in upgrades will include new automated baggage scanners and extensive new retail stores and restaurants. The first of the modernized terminals is scheduled to open in November 2015 and the second in December. Aerostar is marketing the airport to additional airlines, such as Norwegian Air Shuttle, according to the July 2<sup>nd</sup> AP story.</p>
<p><span style="text-decoration: underline;">CBP Backing Off on Private Pilot Intercepts</span>. After strenuous protests from general aviation groups such as AOPA, as well as a provision in the FY 2015 DHS appropriations bill requiring a detailed review, Customs &amp; Border Protection has announced that the program of stopping and searching private planes and their pilots without a warrant is being revised so as to "not needlessly affront law-abiding pilots." CBP says it will no longer target GA planes unless there is clear evidence of illegal activity. AOPA has made no official comment on this announcement, apparently waiting to see what actually happens.</p>
<p><span class="SpellE"><span style="text-decoration: underline;">Airglades</span></span><span style="text-decoration: underline;"> Approved to Manage Florida Airport</span>. The company seeking to privatize the Hendry County Airport in south-central Florida received FAA approval on August 5<sup>th</sup> to take over managing the airport, effective Sept. 12, 2014. <span class="SpellE">Airglades</span> International Airport, LLC will manage and operate the airport on behalf of its sponsor, Hendry County, while FAA continues to review the draft purchase and sale agreement, as part of the application process under the federal Airport Privatization Pilot Program.</p>
<p><span class="SpellE"><span style="text-decoration: underline;">Fraport</span></span><span style="text-decoration: underline;"> Moving Into US Airport Retail</span>. Germany's privatized airport operator <span class="SpellE">Fraport</span> Group has acquired 100% of <span class="SpellE">Airmall</span> USA Holdings. The company operates retail concessions at BOS, BWI, CLE, and PIT. It began as a division of BAA USA, the U.S. arm of privatized BAA plc, former owner/operator of all three privatized London airports. When BAA pulled out of the U.S. market, AMU Holdings acquired the U.S. retail airport operations, which provide 270 retail and restaurant outlets at the four airports, totaling 366,000 sq. ft.</p>
<p><span class="GramE"><span style="text-decoration: underline;">DHS Tests Biometrics for Departing Foreigners</span>.</span> The Department of Homeland Security in late June gave reporters and congressional staffers a look at its mockup airport facility aimed at testing various ways of collecting biometric data from departing tourists from overseas (see last issue's news story). It will test the use of fingerprint, iris-scan, and facial recognition technologies at the Maryland facility, using various scenario exercises. Still not explained is how DHS will deal with those foreign visitors who either do not return home via air and capital and bridge disbursements per mile or do not return at all. But it turns out the creation of this program was not DHS's idea: <span class="GramE">it was mandated by Congress</span>.</p>
<p><span style="text-decoration: underline;">GMR Consortium Awarded Damages from Maldives Government</span>. The consortium that had won GMR a 25-year concession agreement to upgrade and operate the Maldives Airport filed suit against the Maldives government after it cancelled the concession. An international arbitrator awarded $4 million in costs to the GMR Infrastructure/Malaysia Airports Holdings joint venture, for the Maldives' wrongful termination of the concession agreement.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Orlando to Use PFCs for Terminal Expansion</span>.</span> The FAA last month approved Orlando International Airport's continuation of passenger facility charges (PFCs) to finance the first stage of what could amount to a $1.2 billion expansion. That initial phase will include adding a mile-long people mover and a new parking structure south of the existing terminal, adjacent to the site of a forthcoming intermodal center and a second major terminal. The intermodal center will serve the planned All Aboard Florida passenger rail service from Miami and a planned extension of the new Orlando commuter rail service, as well as rental car and bus services from the planned second terminal.</p>
<p><span style="text-decoration: underline;">Generating More Revenue by Satisfying Airport Passengers</span>. A new report from the Transportation Research Board's Airport Cooperative Research Program carries the title, "Improving Terminal Design to Increase Revenue Generation Related to Customer Satisfaction." It is ACRP Report 109 and is available on the TRB website: <a href="http://www.trb.org">www.trb.org</a>.</p>
<p><span style="text-decoration: underline;">Update on Global Entry Renewal</span>. In response to last issue's article on problems with unexpected Global Entry expiration, a long-time reader in the DC metro area emailed to say that his Global Entry material included a phone number that he called to ask about expiration and renewal. The person he spoke with provided his expiration date and said he would get an email about six months before that date, reminding him to renew.</p>
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<p><strong><a name="h"></a>Quotable Quotes</strong></p>
<p>"The inane and politically correct security theater of doing everything to everybody to appear to be unbiased and fair is ridiculous, inefficient, very costly, and negatively affects the entire <span class="GramE">industry.</span> . . . The solution: trust and verify. Find and ID the no-threat passengers and move them out of the queue. The answer is not to look at everyone as a potential security threat, but to look for 'good' people, verify their trust status and identity, and remove them from the huge scrutiny group of travelers as rapidly and effectively as possible. This is a huge psychological win-win for everyone."<br /> &mdash;Capt. Matt Sheehy and Capt. Steve Lucky, "Intelligence-Driven Transportation Security," <em>Blue Line Magazine</em>, November 2013</p>
<p>"Planes fly in and out of Silver Comet Field every day, and any commercial service will constitute a very small percentage of aircraft operations the airport currently handles. Four more take-offs and landings per day will not compromise efficiency or business at Hartsfield-Jackson. Even Hartsfield-Jackson's former aviation director Louis Miller confirmed this multiple times in this very newspaper. However, having limited low-fare commercial service will stimulate competition, as has been demonstrated in numerous domestic and foreign cities with multiple airports, and that is where Delta's issue lies. While it's natural for a company to try to protect its business from competition, how it does it and for what purpose should be scrutinized for all. Competition is the American way. And in the air transportation industry, it is national policy."<br /> &mdash;Robert J. Aaronson, Chairman, Propeller Airports, "Atlanta Needs What Other Major Cities Have," <em>Atlanta Journal-Constitution</em>, April 14, 2014</p>
<p>"The United States is an oddball in this respect. Most airports in the world are privately run. Why? They generate positive cash flow. It will take time for the United States to actually start privatizing airports, but I believe that is the final direction. I'm not saying airports aren't run well; they are, but for the most part [aren't] run like private-sector entities. With everything that resides in the public sector, you're limited in what you can streamline."<br /> &mdash;Interview with incoming Indianapolis Airport Authority Executive Director Mario Rodriguez, "Industry Insider," <em>Airport Business</em>, June/July 2014</p>
<p><a href="#top">&raquo; return to top</a></p>1013973@http://www.reason.orgWed, 06 Aug 2014 21:54:00 EDTbob.poole@reason.org (Robert Poole)Annual Privatization Report 2014http://www.reason.org/news/show/annual-privatization-report-2014
<p>Now in its 27th year of publication, Reason Foundation's <em>Annual Privatization Report</em>&nbsp;is the world's longest running and most comprehensive report on privatization news, developments and trends.</p>
<p><em>Annual Privatization Report 2014</em>&nbsp;details the latest on privatization and government reform initiatives at all levels of government. The individual sections include:</p>
<ul>
<li><a href="http://reason.org/news/show/apr-2014-local-privatization">Local Government Privatization</a></li>
<li><a href="http://reason.org/news/show/apr-2014-state-privatization">State Government Privatization</a></li>
<li><a href="http://reason.org/news/show/apr-2014-federal-privatization">Federal Government Privatization</a></li>
<li><a href="http://reason.org/news/show/apr-2014-education" target="_blank">Education</a></li>
<li><a href="http://reason.org/news/show/apr-2014-air-transportation" target="_blank">Air Transportation</a></li>
<li><a href="http://reason.org/news/show/apr-2014-surface-transportation" target="_blank">Surface Transportation</a></li>
<li><a href="http://reason.org/news/show/apr-2014-transportation-finance" target="_blank">Transportation Finance</a></li>
<li><a href="http://reason.org/news/show/apr-2014-criminal-justice" target="_blank">Criminal Justice and Corrections</a></li>
</ul>
<p>Your comments on <em>Annual Privatization Report 2014</em> are important to us. Please feel free to contact us with questions, suggestions or for more information. For the most up-to-date information on the rapidly changing privatization world, please visit Reason's <a href="/areas/topic/privatization">privatization research archive</a>, and sign up for our monthly <a href="http://reason.org/newsletters/privgovreform/">Privatization &amp; Government Reform Newsletter</a>.</p>
<p>Leonard C. Gilroy, Editor<br />Director of Government Reform, Reason Foundation<br /><a href="mailto:leonard.gilroy&#64;reason.org">leonard.gilroy&#64;reason.org</a></p>1013767@http://www.reason.orgMon, 23 Jun 2014 00:00:00 EDTleonard.gilroy@reason.org (Leonard Gilroy)PreCheck Becoming More Risk-Basedhttp://www.reason.org/blog/show/precheck-becoming-more-risk-based
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">The Transportation Security Administration's PreCheck program had its ups and downs in 2013, with the downs due mostly to an ill-advised policy of letting uninformed, infrequent travelers into PreCheck lanes, gumming things up because those people generally insisted on removing their shoes and jackets, and taking their laptops and cosmetics out of their carry-on bags. But this policy was a key to achieving TSA's overly ambitious goal for last year of moving 25% of daily passengers through the PreCheck lanes, whether they'd been previously vetted or not.</span></p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">While TSA has made no announcement that it is abandoning that policy, a number of signs point in that direction. The privacy impact assessment that TSA posted last fall explained the rules of the game for the new PreCheck Application Program now being rolled out, under which individuals are invited to apply for the program by paying an $85 fee and passing a background check. Page 2 of this document states in black and white that applicants will provide fingerprints and those prints will be submitted to the FBI for a criminal history background check. This is the first public acknowledgement that this kind of actual background check will be made on applicants, just as has been routine for the past decade for airport workers with access to the secure areas of airports.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">Assuming that the expected large numbers of people apply for and get accepted under this program, TSA will no longer have a bureaucratic reason to move un-vetted amateurs into PreCheck lanes to make its numbers look good. And they will also have a positive reason not to do that, since the more word gets around that PreCheck lanes are no longer fast and reliable, the fewer people will fork out $85 and submit to an FBI background check in order to stand in a slightly shorter line for screening.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">It also helps that all the major airlines now offer PreCheck membership to their premium frequent flyer members, and that PreCheck is now in place at 115 airports (as of February). Another recent development will also assist frequent air travelers. On Februry 19<sup>th</sup>, the governments of Canada, Mexico, and the United States announced plans for a North American Trusted Traveler program. It will be based on mutual recognition of their respective Viajero Confiable, Sentri, Global Entry, and Nexus programs.</span>&nbsp;</p>
<p>Even so, one has to wonder whether TSA can possibly meet its announced 2014 goal of having 50% of daily air travelers screened via PreCheck. The number of its enrollment centers sounds impressive, but many are located at sites for the Transportation Worker Identification Credential (TWIC) which tend to be at non-passenger-friendly locations such as seaports. The agency would clearly benefit if it can get the promised Third Party Commercial Enrollment effort up and running. RFPs went out to potential private-sector providers well over a year ago. Yet TSA still has not reported either the status of this promising program or the selection of one or more winning vendors. What is keeping this important program grounded?</p>
<p class="MsoNormal">This article also appears in Robert Poole&rsquo;s <a href="/news/show/airport-policy-and-security-news-98">Airport Policy and Security News #98</a>.</p>1013773@http://www.reason.orgThu, 20 Mar 2014 10:49:00 EDTbob.poole@reason.org (Robert Poole)Privatization of Airports, Air Traffic Control and Airport Securityhttp://www.reason.org/news/show/apr-2014-air-transportation
Annual Privatization Report 2014 <p>The&nbsp;<em>Air Transportation</em>&nbsp;section of Reason Foundation's&nbsp;<a href="http://reason.org/news/show/annual-privatization-report-2014"><em>Annual Privatization Report 2014</em></a>&nbsp;provides an overview of the latest on privatization and public-private partnerships in air transportation. Subsections include:</p>
<p style="padding-left: 30px;">A. Airport Privatization</p>
<p style="padding-left: 30px;">B. U.S. Airport Security</p>
<p style="padding-left: 30px;">C. Air Traffic Control</p>
<p>&raquo; <a href="http://reason.org/files/apr-2014-air-transportation.pdf"><strong><em>Annual Privatization Report 2014: Air Transportation</em></strong></a> [pdf, 530 KB]</p>
<p>&raquo; Complete <a href="http://reason.org/news/show/annual-privatization-report-2014"><strong><em>Annual Privatization Report 2014</em></strong></a></p>1013768@http://www.reason.orgWed, 19 Mar 2014 00:01:00 EDTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #98http://www.reason.org/news/show/airport-policy-and-security-news-98
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">LaGuardia and <span class="GramE">Reagan&nbsp; slots</span>: picking winners and losers</a></li>
<li><span class="SpellE"><a href="#b">PreCheck</a></span><a href="#b"> becoming more risk-based</a></li>
<li><a href="#c">Could privatization rescue Cleveland and Ontario airports?</a></li>
<li><a href="#d">Santa Monica airport dodges another bullet</a></li>
<li><a href="#e">Vulnerability in checkpoint X-ray systems?</a></li>
<li><a href="#f">News Notes</a></li>
<li><a href="#g">Quotable Quote</a></li>
</ul>
<p><strong><a name="a"></a>LaGuardia and Reagan Slots: Picking Winners and Losers</strong></p>
<p>There has been understandable dismay from airport officials and business and civic leaders in a number of smaller cities over the results of the Justice Department's forced sale of American Airlines Group slots at LaGuardia (LGA) and Reagan National (DCA) airports. The winning bidders for the slots will focus on serving large and medium-size metro areas, leaving a number of communities with no scheduled airline service from one or both of those airports, and others with only monopoly service.</p>
<p>This bizarre outcome stems from two factors. The first is the fact that both DCA and LGA are "slot-controlled" airports. Because demand for air service exceeds the FAA-defined capacity of those airports, the FAA's long-standing solution has been a limit on the number of hourly flight operations (landings and take-offs). A numerical limit makes sense&mdash;otherwise there would be massive delays at the most popular hours of the day. But the key question is how those slots are allocated. The two options are either administrative allocation or market allocation&mdash;and FAA has always chosen the former.</p>
<p>The second factor is the Department of Justice (DOJ) notion of promoting competition. Instead of deregulating slot-controlled airports by pushing for marketplace allocation of their capacity, the folks at DOJ insisted on a central-planning approach. In their worldview, there are only two relevant categories of airline: legacy carriers (the now-merged American, Delta, and United) and low-cost carriers (which DOJ defined as JetBlue, Southwest, and Virgin America). That, of course, ignores altogether true low-cost airlines such as Allegiant, Spirit, and the soon-to-be-revamped Frontier. And it also seems to ignore Southwest's evolution in the past decade into an ordinary-cost-carrier, with fares not that different from the three legacy carriers.</p>
<p>Since all the forced slot sales had to be approved by DOJ, it was pretty obvious whose bids would be deemed acceptable, though this was never stated publicly. So at LGA Southwest got 11 slot pairs (22 daily take-offs and landings) and Virgin America got six. And at DCA Southwest got a whopping 27 slot pairs, JetBlue got 20, and Virgin America got four. While the winners had not announced their planned uses of their new slots at the time I wrote this, it is pretty clear to airline analysts that they will use as many as half to add frequencies on routes they already serve from DCA and LGA and use the rest to add new destinations from there. Given the point-to-point model used by these three airlines, the new cities are expected to be large and medium ones, such as Chicago (Midway), Columbus (OH) and Knoxville (TN). Losers will be places that American or US Airways previously served with smaller planes: military base communities such as Augusta (GA), Fort Walton Beach (FL), and Fayetteville (NC), and smaller "spoke" cities such as Islip (NY), Providence (RI), and Wilmington (NC).</p>
<p>There is no objective way to say that DOJ's central plan for these slots is "better" or "worse" than an alternative that would have focused on maintaining LGA and DCA nonstop access to smaller cities. Any such central plan is inherently an arbitrary selection of winners and losers, even though DOJ itself did not select the winning and losing cities. All it had to do was to define which kinds of carriers it would approve. The rest follows directly from their well-known business models.</p>
<p>It's not as if there were no alternative to administrative allocation of these slots. The alternative is market allocation, and the best form of market allocation is runway pricing. Under the approach Ben <span class="SpellE">Dachis</span> and I outlined in a 2007 Reason Foundation policy study "Congestion Pricing for the New York Airports," in advance of each major schedule-change season, the airport's analysts would review the current runway pricing structure (for both landings <em>and takeoffs</em>, mind you) and release a draft of the next period's pricing. Airline schedulers would review their planned schedules and propose modifications to lower their runway charges. Several rounds of this process would lead to a finalized price schedule and revised airline schedules (such as some flights shifted to lower-priced times, other flights switched to larger planes) by the time the schedule changes went into effect.</p>
<p>In the study, <span class="SpellE">Dachis</span> and I addressed all the regularly stated airline concerns about runway pricing, showing (we believe) that this approach not only would work but would be far more effective in both allocating capacity and reducing runway congestion than a slot-trading or slot-market system. I don't have space for that here, but you can read the whole study and supporting materials at <a href="http://reason.org/news/show/congestion-pricing-for-the-new"><span>http://reason.org/news/show/congestion-pricing-for-the-new</span></a><span>.</span></p>
<p>Under the runway pricing approach, both incumbent and new-entrant airlines would seek to maximize the value of serving high-demand airports such as DCA and LGA, in accordance with each carrier's business model. It's not as if runway capacity were the only scarce resource in our economy. In just about all other cases, we let competitors figure out how best to allocate that capacity. That is what Alfred Kahn and the other deregulators surely had in mind when they began the process that led to the Airline Deregulation Act of 1978. It's tragic that our policymakers still haven't fully implemented airline deregulation three and a half decades later.</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong><a name="b"></a>PreCheck</strong><strong> Becoming More Risk-Based</strong></p>
<p>The Transportation Security Administration's <span class="SpellE">PreCheck</span> program had its ups and downs in 2013, with the downs due mostly to an ill-advised policy of letting uninformed, infrequent travelers into <span class="SpellE">PreCheck</span> lanes, gumming things up because those people generally insisted on removing their shoes and jackets, and taking their laptops and cosmetics out of their carry-on bags. But this policy was a key to achieving TSA's overly ambitious goal for last year of moving 25% of daily passengers through the <span class="SpellE">PreCheck</span> lanes, whether they'd been previously vetted or not.</p>
<p>While TSA has made no announcement that it is abandoning that policy, a number of signs point in that direction. The privacy impact assessment that TSA posted last fall explained the rules of the game for the new <span class="SpellE">PreCheck</span> Application Program now being rolled out, under which individuals are invited to apply for the program by paying an $85 fee and passing a background check. Page 2 of this document states in black and white that applicants will provide fingerprints and those prints will be submitted to the FBI for a criminal history background check. This is the first public acknowledgement that this kind of actual background check will be made on applicants, just as has been routine for the past decade for airport workers with access to the secure areas of airports.</p>
<p>Assuming that the expected large numbers of people apply for and get accepted under this program, TSA will no longer have a bureaucratic reason to move un-vetted amateurs into <span class="SpellE">PreCheck</span> lanes to make its numbers look good. And they will also have a positive reason not to do that, since the more word gets around that <span class="SpellE">PreCheck</span> lanes are no longer fast and reliable, the fewer people will fork out $85 and submit to an FBI background check in order to stand in a slightly shorter line for screening.</p>
<p>It also helps that all the major airlines now offer <span class="SpellE">PreCheck</span> membership to their premium frequent flyer members, and that <span class="SpellE">PreCheck</span> is now in place at 115 airports (as of February). Another recent development will also assist frequent air travelers. On <span class="SpellE">Februry</span> 19<sup>th</sup>, the governments of Canada, Mexico, and the United States announced plans for a North American Trusted Traveler program. It will be based on mutual recognition of their respective <span class="SpellE">Viajero</span> <span class="SpellE">Confiable</span>, <span class="SpellE">Sentri</span>, Global Entry, and Nexus programs.</p>
<p>Even so, one has to wonder whether TSA can possibly meet its announced 2014 goal of having 50% of daily air travelers screened via <span class="SpellE">PreCheck</span>. The number of its enrollment centers sounds impressive, but many are located at sites for the Transportation Worker Identification Credential (TWIC<span class="GramE">) which</span> tend to be at non-passenger-friendly locations such as seaports. The agency would clearly benefit if it can get the promised Third Party Commercial Enrollment effort up and running. RFPs went out to potential private-sector providers well over a year ago. Yet TSA still has not reported either the status of this promising program or the selection of one or more winning vendors. What is keeping this important program grounded?</p>
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<p><strong><a name="c"></a>Could Privatization Rescue Cleveland and Ontario's Airports?</strong></p>
<p>Two mid-sized U.S. airports have been hit pretty hard by cuts in airline service in recent years. Ontario (ONT) California has seen its passenger volume shrink from 7.2 million in 2007 to less than 3.9 million in 2013, primarily due to airlines cutting back on less-profitable routes. And now Cleveland (CLE), formerly an important Continental hub, is being de-<span class="SpellE">hubbed</span> by the merged United-Continental, as I predicted back in 2010. The airline announced in early February that it would cut its average daily departures 64% by this June, which translates into 51% fewer passengers (since many of the flights being eliminated are on regional jets). In response, Moody's Investors Service said the change is "credit negative" for the airport, but did not (yet) reduce its bond rating</p>
<p>Both airports face a difficult task in attracting replacement service, because their costs are higher than those of comparable airports. In the case of CLE, its cost per enplaned passenger last year&mdash;before the new cuts&mdash;was $15.37, which Moody's says is nearly twice the average of the U.S. airports that they rate. And with the smaller volume that's in store, Moody's estimates it will soar to as high as $25. Ontario's CPE is also in the double-digit range, and is considered by airport consultant Oliver Wyman to be one of the highest for medium-hub airports. (<span class="GramE">CPE is calculated by adding up all the airport's charges to airlines, such as landing fees and space rentals, and dividing by the number of passengers</span>.)</p>
<p>Given their high costs, both airports need rather drastic change in their cost structures to become competitive&mdash;what Bob Hazel of Oliver Wyman terms a "game-changer" in the case of ONT. And that is likely to be more difficult within the scope of normal government management. ONT is owned by Los Angeles World Airports (operator also of LAX and Van Nuys), which although operated as an enterprise fund, is still essentially a department of the city government, which likes to micro-manage its business decisions. In discussions with Ontario officials about fixing the airport's problems, LAWA has noted that any solution must provide protections for airport workers, a number of <span class="GramE">whom</span> are City of Los Angeles employees. Yet if the situation is analogous to a bankruptcy, protecting existing jobs is not the number one priority&mdash;<em>survival</em> is. CLE, too, operates as part of its city government.</p>
<p>In recent months when transportation reporters have asked me where I think the most likely near-term opportunities are for U.S. airport privatization, my reply has mostly focused on airports that are in dire straits and in need of a serious turn-around. Owners of such airports must realize that for assets of this kind, their previous investments in the airport constitute "sunk costs," which may never be recoverable. That's directly relevant to the current legal battle over ONT, which LAWA has said it would be willing to sell back to the city of Ontario (from which it purchased ONT decades ago) but only for a price of $474 million, to recover most of the $560 million LAWA says it has put into the airport since 1967. The City of Ontario has offered just $250 million.</p>
<p>What an airport company might offer for ONT would depend on its assessment of the airport's growth potential in the multi-airport market of southern California. Of the airports that currently have scheduled service (LAX, SNA, LGB, BUR, and ONT), only ONT has no political constraints on growth, so as a long-term proposition, it would appear to have good prospects. But its attractiveness would also depend on how much political control would remain. Under current federal law, no airport company could buy the airport from LAWA; the only option would be a long-term lease. And from the City of Ontario's standpoint, having LAWA overseeing the lease would not meet its goals of resuming oversight of the airport's future. The only potential win/win/win deal would be a three-way privatization deal, under which LAWA would sell the airport back to Ontario at something like Ontario's current offer, and the latter would lease the airport to the bidder submitting the most credible proposal for turning the airport around, sharing with LAWA any up-front concession fee it might get from the winning bidder. Negotiating such a three-way deal, and getting FAA to bless it under the terms of the Airport Privatization Pilot Program, would take some fancy legal and political work.</p>
<p>Those complexities would make a Pilot Program lease of CLE a model of simplicity. And if the private sector saw the run-down and somewhat struggling San Juan airport as a diamond in the rough, perhaps it would view CLE as a similar turn-around opportunity. The City of Cleveland will never know, unless they test the waters by issuing a request for expressions of interest.</p>
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<p><strong><a name="d"></a>Santa Monica Airport Dodges Another Bullet</strong></p>
<p>Reason Foundation's first office in Los Angeles was located in a business park on the north edge of Santa Monica Municipal Airport (SMO). Among the staff, I was the only one who appreciated the historic significance of this airport. It is the site where the fledgling Douglas Aircraft set up shop in 1922, and later produced all of the company's piston-powered airliners, including the DC-3s, DC-4s, and DC-7s that I flew on as a child in an Eastern Airlines family. A short walk from our office was a very nice restaurant in the same building that housed a small but well-done aviation museum.</p>
<p>Even then, in the late 1980s, SMO was unpopular with city officials, mainly due to the noise from business jets, few of which are based there but many of which use SMO to bring people to and from the area. The City of Santa Monica owns the airport, and as its owner, has tried any number of ways to reduce jet noise, including a night-time curfew, a huge increase in landing fees, and outright bans on noisier jets, only some of which have survived legal scrutiny. But its latest ploy&mdash;rejected last month by federal District Court Judge John F. Walters&mdash;was the claim that the federal government's oversight of the airport had lapsed, so the City could shut it down altogether.</p>
<p>That case rested on a very non-standard review of the airport's legal history. During World War II (when Douglas turned out thousands of military aircraft there), the feds leased the airport for the duration of the war, and made significant capital improvements (as it did with many other civilian airports it leased during the war). In 1948, Congress enacted legislation on de-mobilization of these airports. In consideration of the improvements made during the war, the airport would be handed back, but only if the municipal government agreed to keep the airport in operation in perpetuity, unless the feds agreed to a request to close it. Like most other cities, Santa Monica accepted these terms.</p>
<p>But in its suit filed last October, the City claimed that somehow the transfer agreement had lapsed in 1953 when the last portion of the federal lease expired. It also argued that, in any case, a settlement it had reached with FAA in 1984 (over several SMO anti-business jet policies), with an expiration date of July 1, 2015, basically allowed the City to cease operating the airport as mid-2015. Judge Walters rejected these claims, to cheers from the general aviation community and from many other GA airport operators whose airports might have been at risk of shutdown had Santa Monica's arguments prevailed.</p>
<p>Santa Monica may well have been unwise to sign the hand-back agreement in 1948, and there's room for debate over whether the requirement to operate such airports "in perpetuity" was justified by the government's previous capital investments in the airport. And of course, nobody in 1948 knew that business jets would become an important factor in aviation 40 years later. I still think the airport community needs to do some hard thinking about better compensating airport neighbors for noise, in the long-term interest of aviation's role in transportation. But that is a subject for another time.</p>
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<p><strong><a name="e"></a>Vulnerability of Checkpoint X-Ray Systems?</strong></p>
<p>Could airport checkpoint carry-on baggage scanners be hacked to let through weapons or bombs in such luggage? That is the claim of two security researchers, as reported last month by <em>Wired</em> magazine. The alleged vulnerability is the ability of hackers to subvert the Threat Image Projection (TIP) system built into all such scanners, as used not only at airport checkpoints but also at courthouses, embassies, and other government buildings.</p>
<p>Billy Rios and Terry McCorkle of security firm <span class="SpellE">Qualys</span> presented their findings at the Kaspersky Security Analyst Summit in Punt Cana, Dominican Republic, in early February. They purchased a used <span class="SpellE">Rapiscan</span> 522B system and played with its software. First, they found a way to bypass the supervisor's <span class="GramE">log-in</span> credentials (exposing what should be an easy-to-fix vulnerability). Once into the system, they could access the system the supervisor uses to cause images of weapons and other contraband to pop up on the display screens at screeners' stations. That would enable them to input images of harmless clothing or other items that could be super-imposed over what would otherwise appear on the screen as an actual dangerous item. TIP is a feature of all such X-ray <span class="GramE">scanners,</span> regardless of manufacturer, and regardless of whether the device is used at an airport or elsewhere.</p>
<p>Rapiscan had several responses to these claims, also reported by <em>Wired</em>. First, they say that the version of TIP used on TSA airport machines is different from the "commercial" version, but it's unclear if it is different from that used in other government facilities. Second, <span class="SpellE">Rapiscan</span> says that systems like the one Rios and McCorkle acquired "are not currently networked," and that prior to an airport scanner being decommissioned the proprietary TSA software is removed.</p>
<p>Rios and McCorkle responded that the system they bought has a library of weapons images and instructions of how to use each, which could be subverted by a knowledgeable hacker. They also said that all the operator credentials were stored in the system in an unencrypted text file. Rios also told <em>Wired</em> that the <span class="SpellE">Rapiscan</span> software they examined is based on Windows 98, though more recent models use Windows XP; <span class="GramE">neither is currently supported by Microsoft</span>. And while it is true that TSA airport scanners are not connected to the <span class="GramE">internet</span>, they are all connected to <span class="SpellE">TSANet</span>, which links all the machines at an airport and networks them to central TSA servers. If hackers could get into <span class="SpellE">TSANet</span>, the kind of attack Rios and McCorkle outlined would appear to be possible.</p>
<p>It's not clear how vulnerable checkpoint baggage scanners are to this kind of hacking. But it's disturbing that, according to <em>Wired</em>, "airport security devices are generally not accessible to white-hat hackers who regularly analyze and test the security of commercial and open-source products . . . to uncover vulnerabilities in them."</p>
<p>This sounds like another case for the DHS Inspector General.</p>
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<p><a name="f"></a><strong>News Notes</strong></p>
<p><span class="SpellE"><span style="text-decoration: underline;">Ferrovial</span></span><span style="text-decoration: underline;">, Others Bidding for Heathrow's Non-London Airports</span>. Aberdeen, Glasgow, and Southampton airports are the remaining airports owned by Heathrow Airport Holdings (HAH), after it was required to sell off Gatwick and Stansted. HAH has proposed selling those three airports, too, estimated to be worth $1.3 billion. Spanish infrastructure firm <span class="SpellE">Ferrovial</span> has submitted a proposal to buy them, and Industry Funds Management and Macquarie are also thought to be interested. <span class="SpellE">Ferrovial</span> currently owns 25% of the holding company for HAH.<span style="text-decoration: underline;"></span></p>
<p><span style="text-decoration: underline;">Gary Closes Privatization Deal</span>. Gary/Chicago International Airport in January closed the 40-year deal with Aviation Facilities Company (AVCO) in January, under which the company must make significant improvements to the airport as well as attracting new business. Its subsidiary, <span class="SpellE">AvPorts</span>, has a 10-year contract to manage the airport, with up to six possible five-year renewals. One near-term challenge will be completing the runway extension project, which includes persuading several railroads to shift to new tracks, already built by the airport, that avoid the extended runway.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Google Wins Contract to Manage Moffett Federal Airfield</span>.</span> Google's Planetary Ventures division beat out another firm for a 23-year contract to manage the airport adjacent to NASA Ames Research Center in Mountain View, CA. Included in its provisions is that Planetary Ventures must renovate the three hangars on the field, including the historic giant 200-ft. high airship hangar known as Hangar One.<span style="text-decoration: underline;"></span></p>
<p><span style="text-decoration: underline;">Supreme Court Clears Airlines from Security Suits</span>. Late in January the U.S. Supreme Court ruled 6 to 3 that airlines that report suspicious behavior affecting aviation security to the TSA may not be sued for such reports. This was the first test of a post 9/11 law encouraging airlines to report such behavior. "Congress meant to give air carriers the 'breathing space' to report potential threats to security officials without fear of civil liability for a few inaptly chosen words,<span class="GramE">"&nbsp; wrote</span> Justice Sotomayor for the majority.<span style="text-decoration: underline;"></span></p>
<p><span class="GramE"><span style="text-decoration: underline;">New Concession Will Triple Santiago Airport Capacity</span>.</span> Chile's Ministry of <span class="GramE">Public Works</span> has reached agreement with the Civil Aviation General Directorate on the terms for a 15-year concession to expand the Santiago International Airport. The new $700 million project will add a new international terminal and expand the existing terminal for domestic flights, while also expanding parking structures, taxiways, and aircraft parking. The winning bidder is expected to be the one offering the government the highest fraction of airport tax revenue.<span style="text-decoration: underline;"></span></p>
<p><span style="text-decoration: underline;">Senators Still Concerned Over Searches of Private Planes</span>. Sens. Pat Roberts (R, KS) and Jim <span class="SpellE">Risch</span> (R, ID) are not satisfied with the response they have received from Customs &amp; Border Protection over warrantless searches of general aviation planes and pilots. The two have sent a follow-up letter (Feb. 12<sup>th</sup>) to CPB requesting a briefing and written answers to questions about the legal basis for a growing number of surprise inspections of planes and pilots. <span style="text-decoration: underline;"></span></p>
<p><span style="text-decoration: underline;">New Istanbul Airport on Hold for 10 Months</span>. Construction of the planned $30 billion third airport for Istanbul, the concession for which was awarded last year, will be delayed at least 10 months due to a court ruling challenging the environmental analysis supporting the project. The State Airports Authority was quoted by Reuters as saying the court decision will not halt planning work.<span style="text-decoration: underline;"></span></p>
<p><span style="text-decoration: underline;">India to Privatize 14 More Airports</span>. The government announced on Feb. 19<sup>th</sup> that it will offer concessions to upgrade and operate 14 additional airports, in addition to the six that are already under way via concessions awarded by the Airports Authority of India: Ahmedabad, Chennai, Guwahati, Jaipur, Kolkata, and <span class="SpellE">Lucknow</span>.</p>
<p><span style="text-decoration: underline;">Munich's Third Runway OK'd by Court</span>. A landmark decision by an administrative court in Munich has removed the last legal obstacle to the addition of a third runway to Germany's second-largest airport. It would be 4,000 meters (13,120 ft.) in length and could operate independent of the other two runways. However, political hurdles remain, since all three owners (the city, the state, and the federal government) of <span class="SpellE">Flughafen</span> <span class="SpellE">Muenchen</span> <span class="SpellE">Gesellschaft</span> must agree on the project, and considerable local opposition exists.<span style="text-decoration: underline;"></span></p>
<p><span class="GramE"><span style="text-decoration: underline;">Airport Research Program Launching <span class="SpellE">NextGen</span> Projects</span>.</span> The Airport Cooperative Research Program of the Transportation Research Board will select contractors March 12<sup>th</sup> for four linked studies of airports and the <span class="SpellE">NextGen</span> air traffic control modernization program. The four reports will cover guidance for airport stakeholders on <span class="SpellE">NextGen</span>, how <span class="SpellE">NextGen</span> relates to airport planning, the airport's role in Performance-Based Navigation, and leveraging <span class="SpellE">NextGen</span> spatial data to benefit airports.<span style="text-decoration: underline;"></span></p>
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<p><strong><a name="g"></a>Quotable Quote</strong></p>
<p>"Those [FAA] regulations require pilots to provide certain documents to law enforcement officials who request it, but they don't give officers the authority to stop pilots in the first place. For that they need independent authority, such as probable cause or reasonable suspicion that illegal activity is taking place."<br /> &mdash;Jim Coon, AOPA Senior Vice President, Government Affairs, in Elizabeth Tennyson, "Senators Ask DHS for More Complete Answers About CBP Stops," AOPA News, Feb. 13, 2014</p>
<p><a href="#top">&raquo; retur</a></p>1013757@http://www.reason.orgTue, 04 Mar 2014 21:49:00 ESTbob.poole@reason.org (Robert Poole)PreCheck Expansion Raises Questionshttp://www.reason.org/blog/show/precheck-expansion-raises-questions
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">As a long-time supporter of the concept of risk-based security, and an early member of PreCheck, I am both pleased and troubled by its rapid expansion over the past year. TSA set what sounded like an impossible goal for 2013&mdash;to be screening 25% of daily passengers in PreCheck lanes by the end of the year. Including members recruited via airline frequent flier programs, members of Global Entry and the other CBP trusted traveler programs, and others admitted to PreCheck lanes (see below), TSA said it met that 2013 goal.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">As 2014 begins, PreCheck lanes exist at 114 U.S. airports, and TSA's new program offering $85 memberships to non-frequent flier is under way, with dozens of enrollment sites in operation thus far, and several hundred promised later this year, both at airports and in various other locations. And TSA's PreCheck goal for this year is to be screening <em>half</em> of each day's air travelers by year-end.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">The large increase in numbers is being accomplished in three ways. One is the paid membership program, which requires the applicant to fill out a form, be fingerprinted, and pay $85. Exactly what kind of background check those people are getting remains unclear, though the fingerprints would enable the same kind of FBI criminal history background check required for Global Entry members and for airport workers with access to secure areas. But because of the other two ways PreCheck is being expanded, I doubt that any such background checks are taking place.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">The second approach is selecting travelers who have not applied and putting the PreCheck symbol on their boarding pass for a particular flight. It appears that this is done via a new TSA algorithm that combines airline travel history with the standard Secure Flight checks performed on all travelers to define such people as low-enough risk to give them a "free sample" of PreCheck processing. Many people have been surprised to find the PreCheck symbol on their boarding pass and then be directed by the document checker to the PreCheck lane.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">But the third approach, called "Managed Inclusion," is the one I find most disconcerting. TSA is using some of its Behavior Detection Officers (BDOs) to watch people waiting in the regular screening lines, visually identify some of them as "low-enough risk," and invite them to shift to the PreCheck lane. There is no pretense of any kind of background check in these cases&mdash;just the unscientific hunch of the BDOs that the person appears to be low-risk.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">Managed Inclusion raises serious security questions, since there is no checking of anything beyond the same Secure Flight check against watch list that is applied to every single airline passenger in the United States. Methods 1 and 2 are questionable enough, since it appears that neither involves a Global Entry-type background check.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">And the practical result of methods 2 and 3 has been to overwhelm many of the PreCheck lanes with people who don't understand the rules, and who unpack bags and take off clothes as if they were in the regular lanes, holding up what used to be a very quick and efficient screening for actual PreCheck members. TSA's Ross Feinstein has explained that putting amateurs into PreCheck lanes is a "work in progress. Until we started adding more people to these lanes, we couldn't sustain 10-20 passengers using a PreCheck lane per hour." But that volume increase was going to occur anyway once TSA got the paid membership program up and running.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">In addition, by using BDOs for Managed Inclusion, TSA has come up with something else for these basically useless employees to do. And it seems to have worked. Despite congressional outrage over the scathing GAO report on the ineffectiveness of the Behavior Detection program, Congress failed to reduce the BDO budget in the Omnibus 2014 appropriations bill just enacted.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">The good news is that TSA appears close to approving one or more security companies to take applications and check the bona-fides of those seeking access to PreCheck. Each company would use its own algorithm, demonstrated to TSA's satisfaction to be effective at identifying low-risk travelers. This program, assuming TSA actually signs one or more contracts, would supplement the agency's fledgling enrollment sites, with the companies using their own approaches to marketing PreCheck to prospective customers.</span>&nbsp;</p>
<p class="MsoNormal"><span style="mso-fareast-language: JA;">This article also appears in Robert Poole&rsquo;s <a href="/news/show/airport-policy-and-security-news-97">Airport Policy and Security News #97</a>.</span></p>1013716@http://www.reason.orgWed, 29 Jan 2014 15:12:00 ESTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #97http://www.reason.org/news/show/airport-policy-and-security-news-97
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><span class="SpellE"><a href="#a">PreCheck</a></span><a href="#a"> expansion raises questions</a></li>
<li><a href="#b">Central planning London's airport capacity</a></li>
<li><a href="#c">Battle over a second Atlanta airport</a></li>
<li><a href="#d">More DHS mission creep</a></li>
<li><a href="#e">Europe seeks to reduce airport subsidies</a></li>
<li><a href="#f">News Notes</a></li>
<li><a href="#g">Quotable Quotes</a></li>
</ul>
<p><span><strong><a name="a"></a>PreCheck</strong><strong> Expansion Raises Questions</strong></span></p>
<p><span>As a long-time supporter of the concept of risk-based security, and an early member of <span class="SpellE">PreCheck</span>, I am both pleased and troubled by its rapid expansion over the past year. TSA set what sounded like an impossible goal for 2013&mdash;to be screening 25% of daily passengers in <span class="SpellE">PreCheck</span> lanes by the end of the year. Including members recruited via airline frequent flier programs, members of Global Entry and the other CBP trusted traveler programs, and others admitted to <span class="SpellE">PreCheck</span> lanes (see below), TSA said it met that 2013 goal. </span></p>
<p><span>As 2014 begins, <span class="SpellE">PreCheck</span> lanes exist at 114 U.S. airports, and TSA's new program offering $85 memberships to non-frequent flier is under way, with dozens of enrollment sites in operation thus far, and several hundred promised later this year, both at airports and in various other locations. And TSA's <span class="SpellE">PreCheck</span> goal for this year is to be screening <em>half</em> of each day's air travelers by year-end.</span></p>
<p><span>The large increase in numbers is being accomplished in three ways. One is the paid membership program, which requires the applicant to fill out a form, be fingerprinted, and pay $85. Exactly what kind of background check those people are getting remains unclear, though the fingerprints would enable the same kind of FBI criminal history background check required for Global Entry members and for airport workers with access to secure areas. But because of the other two ways <span class="SpellE">PreCheck</span> is being expanded, I doubt that any such background checks are taking place.</span></p>
<p><span>The second approach is selecting travelers who have not applied and putting the <span class="SpellE"><span class="GramE">PreCheck</span></span><span class="GramE"> symbol on their boarding pass for a particular flight.</span> It appears that this is done via a new TSA algorithm that combines airline travel history with the standard Secure Flight checks performed on all travelers to define such people as low-enough risk to give them a "free sample" of <span class="SpellE"><span class="GramE">PreCheck</span></span> processing. Many people have been surprised to find the <span class="SpellE">PreCheck</span> symbol on their boarding pass and then be directed by the document checker to the <span class="SpellE">PreCheck</span> lane.</span></p>
<p><span>But the third approach, called "Managed Inclusion," is the one I find most disconcerting. TSA is using some of its Behavior Detection Officers (BDOs) to watch people waiting in the regular screening lines, visually identify some of them as "low-enough risk," and invite them to shift to the <span class="SpellE">PreCheck</span> lane. There is no pretense of any kind of background check in these cases&mdash;just the unscientific hunch of the BDOs that the person appears to be low-risk.</span></p>
<p><span>Managed Inclusion raises serious security questions, since there is no checking of anything beyond the same Secure Flight check against watch list that is applied to every single airline passenger in the United States. Methods 1 and 2 are questionable enough, since it appears that neither involves a Global Entry-type background check.</span></p>
<p><span>And the practical result of methods 2 and 3 has been to overwhelm many of the <span class="SpellE">PreCheck</span> lanes with people who don't understand the rules, and who unpack bags and take off clothes as if they were in the regular lanes, holding up what used to be a very quick and efficient screening for actual <span class="SpellE">PreCheck</span> members. TSA's Ross Feinstein has explained that putting amateurs into <span class="SpellE">PreCheck</span> lanes is a "work in progress. Until we started adding more people to these lanes, we couldn't sustain 10-20 passengers using a <span class="SpellE">PreCheck</span> lane per hour." But that volume increase was going to occur anyway once TSA got the paid membership program up and running.</span></p>
<p><span>In addition, by using BDOs for Managed Inclusion, TSA has come up with something else for these basically useless employees to do. And it seems to have worked. Despite congressional outrage over the scathing GAO report on the ineffectiveness of the Behavior Detection program, Congress failed to reduce the BDO budget in the Omnibus 2014 appropriations bill just enacted.</span></p>
<p><span>The good news is that TSA appears close to approving one or more security companies to take applications and check the <span class="GramE">bona-fides</span> of those seeking access to <span class="SpellE">PreCheck</span>. Each company would use its own algorithm, demonstrated to TSA's satisfaction to be effective at identifying low-risk travelers. This program, assuming TSA actually signs one or more contracts, would supplement the agency's fledgling enrollment sites, with the companies using their own approaches to marketing <span class="SpellE">PreCheck</span> to prospective customers.</span></p>
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<p><span><strong><a name="b"></a>Central Planning London's Airport Capacity</strong></span></p>
<p><span>Last month the Davies Commission released its interim report on UK airport capacity needs, with a final report due in 2015. The need for additional capacity has been evident for a decade or two, yet the report focuses on, at best, one additional runway by 2030 and perhaps another by 2050. It reviewed and all-but-rejected several proposals for scrapping Heathrow and replacing it with a greenfield airport in the Thames estuary, far from everyone and requiring vast new road and rail access to be built. And its two preferred options are adding a third runway at Heathrow or a second runway at Gatwick. It also made recommendations for a number of (mostly sensible) interim approaches to squeeze out more use of the existing London-area runways.</span></p>
<p><span>What especially strikes me about the report is its underlying presumption that it is the British government's job to decide how much airport capacity the country needs and where it should be located. This might have been defensible when the government owned all three major London airports via the British Airports Authority. But thanks to the Thatcher administration's privatization of BAA in 1987 and the more recent competition commission actions to break up the company's near-monopoly, southeast England now has three major investor-owned airports competing with one another: Heathrow, Gatwick, and Stansted. And <span class="GramE">they are joined by niche-market competitors London City and London <span class="SpellE">Luton</span></span>. So why not let the investors who now own each airport decide what business model makes sense for each to follow, and risk their own funds developing the capacity to match?</span></p>
<p><span>To my surprise, the only voice raised in support of this approach has been that of Michael O'Leary, the outspoken CEO of <span class="SpellE">Ryanair</span>, Europe's largest low-cost carrier. In an op-ed in the <em>Daily Telegraph</em> the day after the Commission's report, O'Leary said the government should let the market decide where to build airport runways. "Each of these airports should be given permission to build an additional runway whenever they choose to, subject only to normal planning consents." The underlying rationale for airport privatization is that airports are not inherently governmental, and can and should be investor-owned utilities. They should not be operated as a government-managed cartel.</span></p>
<p><span>To be sure, none of the local objections to noise and emissions would be any different if the UK government gave <span class="GramE">each airport permission</span> to expand. Each would have to come up with a proposal that could obtain planning permission, minimizing and mitigating the negative externalities, just as U.S. airports must do when seeking to expand. The costs of doing so would be included in the cost of each expansion project, to be recovered from airport fees and charges. If only one of the three airports came up with a proposal that got to "yes," it would be rewarded for its skill in developing such a proposal.</span></p>
<p><span>The current UK airports policy is the opposite of what is required. Instead of allowing airports to develop and implement inherently costly expansion programs, it continues to impose price controls on these no-longer-monopoly airports, depriving them of the resources needed to expand. But simultaneously it taxes airport passengers at outrageous levels and pockets the money as a general revenue source. Last month the government increased its departure tax for the sixth time in six years. The <em>tax</em> on a flight to the USA in economy class is $113; premium cabin passengers must pay $226. Flights to the Caribbean incur a departure tax of $139 economy and $279 premium. Those are per-person; for a family vacation, multiply by the number of family members. And then, of course, there's the <span class="GramE">air fare</span>. </span></p>
<p><span>British aviation policy needs a major rethink. Where are Adam Smith and Margaret Thatcher when we need them?</span></p>
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<p><span><strong><a name="c"></a>Battle Over Second Atlanta Airport Heats Up</strong></span></p>
<p><span>Since I wrote about the plan to bring commercial airline service to tiny Paulding County Airport (northwest of Atlanta) in the November issue, the battle over whether this will be allowed has escalated. Six residents who filed a lawsuit opposing commercial service agreed to a settlement <span class="SpellE">lat</span> month in the U.S. Court of Appeals. They dropped their suit in exchange for the airport agreeing to an environmental assessment by the FAA, but the decision also gave the airport permission to proceed with its current project to add a runway safety zone and widen a taxiway. The FAA assessment could take up to a year.</span></p>
<p><span>A news article in the <em>Wall Street Journal</em> (December 18<sup>th</sup>) headlined "Why Is Delta Afraid of This Tiny Airport?" highlighted that airline's outspoken opposition to any competition with its massive hub operation at Atlanta's Hartsfield-Jackson International Airport. In addition to comparing various statistics on the two airports (such as 203 gates compared with one), reporters Susan Carey and Cameron <span class="SpellE">McWhirter</span> included a table comparing the airports available in the top 10 US metro areas. New York and Los Angeles each have five airports; Boston, Miami, Philadelphia, and Washington each have three; Chicago, Dallas, and Houston have two apiece. Only Atlanta&mdash;second largest of the top 10&mdash;has but a single commercial airport. Yet we are expected to believe that a second airport "isn't commercially viable or economically sound for the region."</span></p>
<p><span>There have been two studies of this question in recent years. <span class="GramE">The first, largely funded by the FAA, was carried out by a consultant under the direction of the City of Atlanta Department of Aviation</span> (somehow presumed to be a neutral party). Released in May 2011, it considered 29 possible sites, narrowing those down to eight for more detailed analysis (including the Paulding County and Gwinnett County airports). After estimating the costs of the eight candidates at between $1.4 billion and $2.9 <span class="GramE">billion(</span>!), the report concluded that the benefits of a second airport would exceed its costs. The second study, carried out by a Georgia Tech group, found that three sites, including Paulding County, were acceptable sites for a second commercial airport.</span></p>
<p><span>The legal assault on Paulding County's plan has escalated considerably. A detailed report by the Associated Press identified four "heavy-hitting" law firms that have filed three lawsuits, submitted open records requests for numerous documents, taken depositions, started a website, and launched a nonprofit 501(c)(4) issue advocacy group. Paulding County officials say these efforts are being funded by Delta, but the evidence is circumstantial. Delta has been a client of three of the law firms, including McKenna, Long &amp; Aldridge (which has created the advocacy group) and Sidley Austin, which filed the legal challenge over FAA approval. The attorney in the latter case is Peter <span class="SpellE">Steenland</span>, brother of Doug <span class="SpellE">Steenland</span>, former Northwest Airlines CEO during its merger with Delta.</span></p>
<p><span>Delta's pilots union has sent representatives to local meetings to argue against the new airport, alleging that having a second airport "will raise our cost of doing business, and when Delta sneezes Georgia gets a cold." AP also reports that a Delta pilot told a local meeting that he's concerned a second airport could "take away funding from Hartsfield-Jackson."</span></p>
<p><span>The only airline known to have shown interest in serving Paulding County Airport (now renamed Silver Comet Field) is ultra low-cost carrier Allegiant. I'm amazed that Delta finds this tiny airport and this very different niche carrier to be such a threat. And the plain fact that all other major US metro areas have more than one commercial airport suggests that Delta's expressed concerns are huge exaggerations.</span></p>
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<p><span><strong><a name="d"></a>More DHS Mission Creep</strong></span></p>
<p><span>Two branches of the Department of Homeland Security&mdash;Customs &amp; Border Protection and TSA--have been conducting (or condoning) warrantless searches. Unexpected ramp searches of general aviation aircraft by CPB have aroused the Aircraft Owners &amp; Pilots Association (AOPA). The second type of search, in which TSA has encouraged operators of valet parking at commercial airports to search cars parked there, has received far less publicity.</span></p>
<p><span>Over 40 GA pilots have told AOPA <span class="GramE">that they and their plane have been searched by Customs &amp; Border Protection agents</span> (or by local law enforcement acting at CBP's request). In September AOPA President Mark Baker met with Rep. Sam Graves (R, MO) to discuss the issue, which led to Graves requesting the Inspector Generals of both DHS and DOT to investigate these actions. Graves pointed out that no evidence of criminal activity has been found in any of these searches. Thomas <span class="SpellE">Winkowski</span>, acting commissioner of CBP, has responded that various federal regulations permit "any federal agent" to check pilot and aircraft documents as the basis for stopping, searching, and even detaining law-abiding GA pilots on domestic flights. </span></p>
<p><span>AOPA General Counsel Ken Mead cites an internal CPB memo that calls such searches "zero-suspicion seizures" as indicating that the agency has overstepped its bounds. "We don't object to law enforcement officers stopping and searching general aviation aircraft when they have a legitimate reason to do so&mdash;in other words, when they have probable cause or reasonable suspicion of illegal activity." But he adds, "It is our position that federal law enforcement officers have absolutely no authority to stop GA aircraft without meeting that legal standard." In a troubling sign that CPB has no intention of backing down, it has recently moved to reclassify the data in its Air and Marine Operations Surveillance System (AMOSS) to exempt them from the Privacy Act, which makes them unavailable to reporters, attorneys, and everyone else.</span></p>
<p><span>Stories also appeared in the media last year about a number of cases in which TSA-approved airport security plans call for inspecting every vehicle left in the care of airport valet parking. Shocked passengers at Birmingham, Rochester, and San Diego have complained about learning&mdash;sometimes via a card left inside the car&mdash;that the vehicle had been searched "under TSA regulations." Bob Burns of the TSA Blog Team responded to the initial outcries by trying to deflect attention from the agency itself to the airport's own security plan (which of course is worked out under the direction of the airport's TSA Federal Security Director). </span></p>
<p><span>The rationale for searching valet-parked cars is that such cars may be left at curbside, next to the terminal, for an uncertain period of time until the valet attendant drives them to the valet parking area. And that if a bomb were inside the car when next to the terminal, it could kill or injure many more people than if it went off inside the nearby parking structure. But many other vehicles linger for a while at the terminal curbside and could be an equally large threat&mdash;but they are not searched.</span></p>
<p><span>The underlying problem with both the GA aircraft searches and the valet parking searches is that they are done without probable cause and without a warrant. The Fourth Amendment supposedly protects Americans from such searches. In historical context, it was a huge change to "search" every single airline passenger before permitting him or her to proceed to the gate. But given what appeared to be the dire threat to aircraft and passengers exemplified by Al Qaeda, Congress and most Americans agreed to this exception to the Fourth Amendment. More than 12 years later, even mandatory screening of every passenger is looking like overkill. And searching private planes and passengers' cars without probable cause and a warrant is exactly the kind of DHS mission creep Congress should put a stop to.</span></p>
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<p><span><strong><a name="e"></a>Europe Seeking to Reform Airport Subsidies</strong></span></p>
<p><span>After many years of spending about $4 billion per year on subsidies to airports, the European Commission is seeking to reduce and reform this subsidy program. Within the EU are 460 nominally commercial airports, only about 15% of which are profitable. These are mostly the 15% that have been partially or fully privatized over the past two decades. Some 87% of the 460 airports get taxpayer subsidies, pretty much coinciding with being state-owned. Of the 460, 71 handle more than 5 million annual passengers. Another 33 handle between 3 and 5 million. Some 275 airports handle fewer than a million passengers a year, and 185 of those handle fewer than 200,000 a year.</span></p>
<p><span>The European Union has rules on state aid, which is not supposed to be used in ways that distort markets. But at least 60 airports are currently being investigated for breaking those rules, and legal loopholes abound. <em>The Economist</em> calls the overall array of regulations "cumbersome, inflexible, and unenforceable," and even <span class="SpellE">Ryanair</span> CEO Michael O'Leary, whose airline has benefited extensively from subsidies to smaller regional airports, calls the current rules "lunatic" and has supported efforts to reform them.</span></p>
<p><span>The Commission last July proposed a significant overhaul and simplification. Airports with more than 5 million annual passengers (such as <span class="SpellE">Ryanair</span> base Charleroi in Belgium with 6.5 million annual passengers) would no longer get capital subsidies, on the grounds that such volume permits purely commercial finance. For smaller airports, the extent of aid will depend on passenger volume, with a higher fraction of capital costs eligible for subsidy at the smaller airports, and no capital subsidies for non-aeronautical facilities. And although operating subsidies are theoretically not allowed under current rules, they in fact are widespread. So the reform proposes to <span class="GramE">phase</span> them out over a 10-year period, while restricting them to airports with less than 3 million annual passengers. The new rules would also permit airports under 3 million to give start-up aid to airlines for up to the first two years of new service.</span></p>
<p><span>The consultation period ended in October, and the final revised rules are due to be issued in the near future. Michael O'Leary, to many people's surprise, calls them "terrific," which may reflect his realization that the subsidization that has contributed to <span class="SpellE">Ryanair's</span> success was not sustainable.</span></p>
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<p><a name="f"></a><strong>News Notes</strong></p>
<p><span style="text-decoration: underline;">Wrongful Inclusion on No-Fly List Must Be Remedied</span>. A federal district judge in California ruled on January 14<sup>th</sup> that when the DHS errs in putting an air traveler on the no-fly list, it must provide a procedure for that name to be removed from the list. Because of the sensitive nature of the case, Judge William <span class="SpellE">Alsup's</span> decision is sealed until April, giving DHS time to appeal the decision. The case has dragged on for nine years before reaching this point in the legal process.</p>
<p><span style="text-decoration: underline;">MIA's Airport City Drastically Scaled Back</span>. The recently installed airport director of Miami International Airport has scaled back the ambitious plan to develop an Airport City on unused airport land. Instead of using 33.5 acres for commercial and retail purposes, the revised plan will be just 9 acres. The project was previously awarded to Brazilian-based <span class="SpellE">Odebrecht</span> USA, which has done other projects at MIA and elsewhere in Miami. But because its parent company has two projects under way in Cuba, the project has aroused political controversy. The final decision will be made by the Miami-Dade County Commission.</p>
<p><span style="text-decoration: underline;">Increased US Access for Tijuana Airport</span>. The <em>New York Times</em> has reported (January 19<sup>th</sup>) progress on an ambitious plan to enable U.S. air travelers to park their cars next to the border and walk across an enclosed 325-foot walkway to Tijuana International. <span class="GramE">The project is being led by Chicago investor Sam Zell</span>. Even without this easy access, about 2.5 million U.S. travelers use the Tijuana airport, accounting for about 60% of its enplanements. Fares to destinations in Mexico are significantly lower than those from San Diego International, John Wayne, and LAX. The project is a joint venture of privatized Mexican airport operator GAP and Zell's Equity Group Investments. It has State Department approval and is negotiating with Customs &amp; Border Protection for provision of checkpoints.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Gary Airport P3 Agreement Nearing Approval</span>.</span> The airport board of Gary/Chicago International Airport has reached agreement with its winning bidder on terms for improving and managing the airport. The team, led by Aviation Facilities Company and <span class="SpellE">AvPorts</span> Management has agreed to invest $100 million in the airport over the next 40 years, as well as operating and managing the airport. The airport board will hold a public hearing on January 27<sup>th</sup> to explain the plan, and is expected to vote to approve it shortly thereafter.</p>
<p><span style="text-decoration: underline;">Spanish Ghost Airport for Sale</span>. It cost &euro;1 billion to develop, but the Ciudad Real airport&mdash;halfway between Cordoba and Madrid&mdash;is being auctioned off with the minimum required bid at &euro;100 million. The airport was completed in 2009 as part of Spain's real estate bubble, and attracted only a handful of daily flights before being closed in bankruptcy in April 2013. It is one of a number of "ghost airports" in Spain.</p>
<p><span style="text-decoration: underline;">CLEAR Lanes in Houston Integrated with <span class="SpellE">PreCheck</span></span>. Travelers at Houston Intercontinental who are members of both CLEAR and <span class="SpellE">PreCheck</span> can pass directly from CLEAR check-in to the <span class="SpellE">PreCheck</span> lanes in Terminals A and B, with similar integration "coming soon" to Terminal C.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Malaysia Company Buys 40% of Turkish Airport</span>.</span> Part-privatized Malaysia Airports Holdings has purchased 40% of GMR Group's equity stake in <span class="SpellE">Instanbul</span> <span class="SpellE">Sabiha</span> <span class="SpellE">Gokcen</span> Airport (ISG). The price, which also included LGN Tourism, was $309 million. ISG hosts 58 airlines serving 125 destinations.</p>
<p><span style="text-decoration: underline;">SeaTac Airport Spared Minimum Wage Mandate</span>. A judge of King County Superior Court ruled that the referendum approved recently by voters in the city of SeaTac does not apply to the airport itself, but only to businesses located elsewhere in the tiny city that surrounds and includes the airport. The reason for the decision is that the <span class="GramE">airport is owned by the Port of Seattle, which under state law has "exclusive jurisdiction" over</span> the airport.</p>
<p><span class="SpellE"><span style="text-decoration: underline;">Aeroports</span></span><span style="text-decoration: underline;"> de Paris to Upgrade Croatian Airport</span>. A consortium headed by <span class="SpellE">Aeroports</span> de Paris and including construction giant Bouygues has won a 30-year concession agreement to modernize and operate the terminal at Zagreb Airport in Croatia's capital city. The consortium will invest &euro;331 million in the project.<span style="text-decoration: underline;"></span></p>
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<p><strong><a name="g"></a>Quotable Quotes</strong></p>
<p>"TSA's new policy of randomly choosing unprepared travelers and directing them to <span class="SpellE">PreCheck</span> lanes once reserved for elite frequent fliers and members of CPB schemes such as Global Entry is troublesome, bordering on <span class="GramE">suicidal.</span> . . . TSA seems intent on destroying the advantages of <span class="SpellE">PreCheck</span> by flooding its lanes with <span class="SpellE">unvetted</span>, unprepared, and uneducated travelers who have no idea what the program is about or how to use it. That's causing epic back-ups at <span class="SpellE">PreCheck</span> lanes, which until lately had been known for their speedy service and civilized screening procedures."<br /> &mdash;Joe <span class="SpellE">Brancatelli</span>, "How the TSA Could Ruin <span class="SpellE">PreCheck</span>," <em>The Business Journals</em>, Dec. 12, 2013 (<a href="http://www.bizjournals.com/bizjournals/blog/seat2B/2013/12/tsa-expands-precheck-security-bypass.html">www.bizjournals.com/bizjournals/blog/seat2B/2013/12/tsa-expands-precheck-security-bypass.html</a>)</p>
<p>"What can we learn from the British, Europeans, and others in terms of airport security and the flying experience? When Europe began confronting terrorist hijackings in the late 1960s, the initial approach often was to use government employees to enhance airport security. Then in the 1980s, European airports began developing a P3 [public-private partnership] model&mdash;government setting the security standards and airports carrying them out with private security companies. Many now follow this model, or look to Israel's airport security&mdash;recognized as the best in the world. What does it do well that we can take to our airports?"<br /> &mdash;Rep. Bill Shuster (R, PA), Chairman, House Transportation &amp; Infrastructure Committee, Speech before the International Aviation Club on the State of Aviation &amp; the Next Aviation Reauthorization, Dec. 11, 2013</p>
<p>"[<span class="GramE">W]hat</span> you are now seeing is development of a much more competitive airport market. And that then calls into question whether you need regulation, which is really designed for the constraint of monopoly. If you don't really have monopoly, what is the role of regulation? I think there's a case for saying that in general, you should avoid regulation and move much more, as in other sectors of the economy, to rely on competition law. But even when you have regulation, it needs to be much more strongly justified than in the past."<br /> &mdash;Harry Bush, former Group Director for Regulation, UK Civil Aviation Authority, "Evolving Trends in Airport Regulation," <em>Airport Public-Private Partnerships</em>, <span class="SpellE">LeighFisher</span>, November 2013</p>
<p>"European airport capacity is like the statistician standing with one foot in a bucket of boiling water and one on a block of ice; on average, he feels fine. Europe has both an airport capacity crunch and a capacity surplus at the same time. We have lots of airports, just not where we need them. To argue that the State Aid rules help with the capacity crunch because you just never know when that white elephant airport might come in handy is disingenuous, to say the least."<br /> &mdash;Andrew Charlton, "State Aid and Airports: Pork Barrel Meets Sausage Machine," <em>Aviation Intelligence Reporter</em>, October 2013</p>
<p><a href="#top">&raquo; return to top</a></p>1013705@http://www.reason.orgThu, 23 Jan 2014 18:00:00 ESTbob.poole@reason.org (Robert Poole)Is the Increased TSA Security Fee Actually a Tax? http://www.reason.org/blog/show/is-the-increased-tsa-security-fee-a
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-bidi-font-family: ">The recent budget agreement between the House and Senate increased the TSA per-passenger security fee from $2.50 per enplanement to a flat $5.60 per one-way trip. The fee generates revenue that pays for a portion of TSA's $5.2 billion aviation security budget. The budget did eliminate the $420 million per year in aviation fees billed directly to the airlines since this was the amount the airlines were paying for security prior to 9/11. But the $5.60 fee will more than offset this cost reduction to the airlines. But is it accurate to call it a &ldquo;tax increase,&rdquo; rather than a user fee?</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-bidi-font-family: ">The airlines lobbied hard against the change, attacking it as a tax increase in disguise. Airlines for America recruited the Air Line Pilots Association, the Global Business Travel Association, IATA, Consumer Travel Alliance, and the Regional Airline Association to help fight the proposed increase.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-bidi-font-family: ">A4A attacked the proposed increase as only adding to the tax burden on airlines and passengers, reducing (at the margin) the number who choose to travel by air. (I will leave aside the inconsistency of airlines' significant increase in fees for things like checked and carry-on bags, which apparently don't suppress demand.) A4A president Nick Calio's recent op-ed in <em style="mso-bidi-font-style: normal;">The Hill</em> made two additional points. TSA provides some degree of security for other modes of transportation (e.g., Amtrak), but only airlines and their passengers have to pay for this; the other modes get TSA services at no charge. Also, TSA would be providing no additional services to airlines or passengers in exchange for the increased fee level.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-bidi-font-family: ">But nowhere in any of the airline material was there any mention of what I think was the strongest argument against the proposed fee increase. Jeff Davis of <em style="mso-bidi-font-style: normal;">Transportation Weekly</em> pointed out the dirty little secret in his Nov. 26<sup>th</sup> issue. As he explains, the existing $2.50/segment fee is categorized as a "discretionary offsetting collection." That means the $2 billion a year it generates is subtracted from TSA's $5.2 billion aviation security budget, for a net budgetary cost of $3.2 billion. In other words, the $2.50 fee was in fact a user fee, not a tax. "But in order to make sure that any fee increase goes to deficit reduction, the Ryan budget assumed that the increased portion of the fee would be classified as mandatory receipts or revenues, deposited in the general fund, and could not be used to offset any TSA spending."</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-bidi-font-family: ">Bingo&mdash;the increase was in fact a tax, not a user fee. The proceeds of the increase go into the general fund, to reduce the deficit. I know the explanation is arcane, but there it is in black and white. Both House Republicans and Senate Democrats were able to dress up a tax increase in user-fee clothing. They singled out this one industry for a special tax to reduce the deficit. The airlines and their coalition should have made this point more explicitly, rather than continuing to portray the airlines as overtaxed, when nearly all the taxes they pay are actually user taxes that support the aviation infrastructure they depend on. But they have cried wolf so often, I doubt if many people believed them in this case, when they were actually correct.</span>&nbsp;</p>
<p class="MsoNormal" style="mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-bidi-font-family: ">An earlier version of this article appeared in Robert Poole&rsquo;s </span><a href="/blog/archive/2013-12-08.html"><span style="mso-bidi-font-family: ">Airport Policy News </span><span style="mso-bidi-font-family: ">e-newsletter #96</span></a><span class="MsoHyperlink"><span style="mso-bidi-font-family: ">.</span></span><span style="mso-bidi-font-family: "></span></p>1013675@http://www.reason.orgMon, 23 Dec 2013 09:45:00 ESTbob.poole@reason.org (Robert Poole)TSA Behavior Detection Blasted by GAOhttp://www.reason.org/blog/show/tsa-behavior-detection-blasted-by-g
<p class="MsoNormal" style="margin-bottom: 10.0pt; mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;">In one of the hardest-hitting GAO reports I've ever read, Congress's auditing organization has, in effect, said that the TSA's Screening of Passengers by Observation Techniques (SPOT ) program does not work and should be defunded. Members of Congress asked GAO to answer two questions:</p>
<p class="MsoNormal" style="margin-top: 0in; margin-right: 0in; margin-bottom: 5.0pt; margin-left: .5in; text-indent: -.5in; mso-pagination: none; mso-list: l0 level1 lfo1; tab-stops: 11.0pt .5in; mso-layout-grid-align: none; text-autospace: none;"><!--[if !supportLists]--><span style="mso-fareast-font-family: "><span style="mso-list: Ignore;">1.<span style="font: 7.0pt "> </span></span></span><!--[endif]--><span style="mso-fareast-language: JA;">To what extent does available evidence support use of behavioral indicators to identify aviation security threats?</span></p>
<p class="MsoNormal" style="margin-top: 0in; margin-right: 0in; margin-bottom: 5.0pt; margin-left: .5in; text-indent: -.5in; mso-pagination: none; mso-list: l0 level1 lfo1; tab-stops: 11.0pt .5in; mso-layout-grid-align: none; text-autospace: none;"><!--[if !supportLists]--><span style="mso-fareast-font-family: "><span style="mso-list: Ignore;">2.<span style="font: 7.0pt "> </span></span></span><!--[endif]--><span style="mso-fareast-language: JA;">To what extent does TSA have data necessary to assess the effectiveness of the SPOT program in identifying threats to aviation security?</span></p>
<p class="MsoNormal" style="margin-bottom: 10.0pt; mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">The answer to the first is that there is no such evidence, and to the second is that TSA does not have such data. This is laid out in 55 pages of text plus seven appendices. ("TSA Should Limit Future Funding for Behavior Detection Activities," GAO-14-159, November 2012)</span></p>
<p class="MsoNormal" style="margin-bottom: 10.0pt; mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">TSA says the purpose of the program is to identify high-risk passengers based on behavioral indicators that indicate "mal-intent." Accordingly, its cadre of Behavior Detection Officers (BDOs) are trained to size up passengers as they await screening using a memorized checklist of behaviors indicative of stress, fear, or deception. Passengers with a sufficiently high point score are taken aside for an interview, a pat-down, and a search of their belongings. Assuming nothing bad is found, and the person's behavior does not "escalate," that's the end of the process and the passenger gets back in line. But if the behavior reaches a pre-defined threshold, a law enforcement officer (LEO) is summoned to further question the passenger and decide if an arrest is warranted. The initial (pre-LEO) encounter takes an average of 13 minutes. The program started in 2007 and has grown to about 3,000 BDOs working at 176 airports, at a current annual cost of around $200 million.</span></p>
<p class="MsoNormal" style="margin-bottom: 10.0pt; mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">The GAO team reviewed two TSA studies of the SPOT program and found both to be non-rigorous, with considerable flaws in their methodology. It then carried out a literature review and a meta-analysis of research studies on "whether nonverbal behavioral indicators can be used to reliably identify deception." And the answer is that "research from more than 400 separate studies on detecting deceptive behavior based on behavioral cues or indicators found that the ability of human observers to accurately identify behavior based on behavioral cues or indicators is the same as or slightly better than chance." GAO provides excerpts from several of these studies, by entities such as RAND Corporation, DOD's JASON program, and MITRE Corporation. Another section of the report documents the wide variation in referral rates by BDOs at various airports, as well as presenting evidence on the subjective nature of some of the behavioral indicators BDOs are taught to look for.</span></p>
<p class="MsoNormal" style="margin-bottom: 10.0pt; mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">But the most damning information of all is who actually gets identified as "high risk" and referred to a LEO. Not a single potential terrorist was identified by the BDOs. Those who ended up arrested were for such matters as possessing fraudulent documents, possessing prohibited or illegal items, having outstanding warrants, being intoxicated in public, being in the country illegally, or disorderly conduct. While all those things may be law violations, <em>not a single one is, per se, a threat to aviation security</em>. And yet the only measure TSA has for the alleged effectiveness of the program is the referrals to law enforcement.</span></p>
<p class="MsoNormal" style="margin-bottom: 10.0pt; mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">Nonetheless, TSA has recently conducted a "return-on-investment analysis" which it claims justified the SPOT program. Despite zero evidence that the program can detect or deter aviation-oriented terrorists, the analysis assumes that the BDO "layer of security" prevents a catastrophic (9/11-type) attack. GAO dryly notes that "the analysis relied on assumptions regarding the effectiveness of BDOs and other countermeasures that were based on questionable information."</span></p>
<p class="MsoNormal" style="margin-bottom: 10.0pt; mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">In response to previous GAO and Inspector General criticism, TSA is developing a new set of metrics about SPOT, but says it will require at least an additional three years and additional resources to report on the program's performance and security effectiveness. Meanwhile, it is asking for a budget increase to add 584 more BDOs so the program can expand to smaller airports. In other words, to paraphrase a familiar line about the recent federal health-care law, we have to keep running and expanding the program to see if it works.</span></p>
<p class="MsoNormal" style="margin-bottom: 10.0pt; mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-fareast-language: JA;">GAO sums up this comprehensive assessment as follows: "10 years after the development of the SPOT program, TSA cannot demonstrate the effectiveness of its behavior detection activities. Until TSA can provide scientifically validated evidence demonstrating that behavioral indicators can be used to identify passengers who may pose a threat to aviation, the agency risks funding activities that have not been determined to be effective."</span></p>
<p class="MsoNormal" style="margin-bottom: 10.0pt; mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;">This article also appears in Robert Poole&rsquo;s <a href="/news/show/airport-policy-and-security-news-96">Airport Policy and Security News #96</a>.</p>
<p class="MsoNormal">&nbsp;</p>1013652@http://www.reason.orgThu, 05 Dec 2013 10:40:00 ESTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #96http://www.reason.org/news/show/airport-policy-and-security-news-96
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">TSA behavior-detection blasted by GAO</a></li>
<li><a href="#b">Airport slots and deregulation</a></li>
<li><a href="#c">Increased TSA security fee&mdash;or tax?</a></li>
<li><a href="#d">Expanding U.S. airport capacity</a></li>
<li><a href="#e">Armed TSA screeners?</a></li>
<li><a href="#f">News Notes</a></li>
<li><a href="#g">Quotable Quotes</a></li>
</ul>
<p><strong><a name="a"></a>TSA Behavior Detection Blasted by GAO</strong></p>
<p>In one of the hardest-hitting GAO reports I've ever read, Congress's auditing organization has, in effect, said that the TSA's Screening of Passengers by Observation Techniques (SPOT ) program does not work and should be defunded. Members of Congress asked GAO to answer two questions:</p>
<ol start="1" type="1">
<li><span>To what extent does available evidence support use of behavioral indicators to identify aviation security threats?</span></li>
<li><span>To what extent does TSA have data necessary to assess the effectiveness of the SPOT program in identifying threats to aviation security?</span></li>
</ol>
<p>The answer to the first is that there is no such evidence, and to the second is that TSA does not have such data. This is laid out in 55 pages of text plus seven appendices. ("TSA Should Limit Future Funding for Behavior Detection Activities," GAO-14-159, November 2012)</p>
<p>TSA says the purpose of the program is to identify high-risk passengers based on behavioral indicators that indicate "mal-intent." Accordingly, its cadre of Behavior Detection Officers (BDOs) are trained to size up passengers as they await screening using a memorized checklist of behaviors indicative of stress, fear, or deception. Passengers with a sufficiently high point score are taken aside for an interview, a pat-down, and a search of their belongings. Assuming nothing bad is found, and the person's behavior does not "escalate," that's the end of the process and the passenger gets back in line. But if the behavior reaches a pre-defined threshold, a law enforcement officer (LEO) is summoned to further question the passenger and decide if an arrest is warranted. The initial (pre-LEO) encounter takes an average of 13 minutes. The program started in 2007 and has grown to about 3,000 BDOs working at 176 airports, at a current annual cost of around $200 million.</p>
<p>The GAO team reviewed two TSA studies of the SPOT program and found both to be non-rigorous, with considerable flaws in their methodology. It then carried out a literature review and a meta-analysis of research studies on "whether nonverbal behavioral indicators can be used to reliably identify deception." And the answer is that "research from more than 400 separate studies on detecting deceptive behavior based on behavioral cues or indicators found that the ability of human observers to accurately identify behavior based on behavioral cues or indicators is the same as or slightly better than chance." GAO provides excerpts from several of these studies, by entities such as RAND Corporation, DOD's JASON program, and MITRE Corporation. Another section of the report documents the wide variation in referral rates by BDOs at various airports, as well as presenting evidence on the subjective nature of some of the behavioral indicators BDOs are taught to look for.</p>
<p>But the most damning information of all is who actually gets identified as "high risk" and referred to a LEO. Not a single potential terrorist was identified by the BDOs. Those who ended up arrested were for such matters as possessing fraudulent documents, possessing prohibited or illegal items, having outstanding warrants, being intoxicated in public, being in the country illegally, or disorderly conduct. While all those things may be law violations, <em>not a single one is, per se, a threat to aviation security</em>. And yet the only measure TSA has for the alleged effectiveness of the program is the referrals to law enforcement.</p>
<p>Nonetheless, TSA has recently conducted a "return-on-investment analysis" which it claims justified the SPOT program. Despite zero evidence that the program can detect or deter aviation-oriented terrorists, the analysis assumes that the BDO "layer of security" prevents a catastrophic (9/11-type) attack. GAO dryly notes that "the analysis relied on assumptions regarding the effectiveness of BDOs and other countermeasures that were based on questionable information."</p>
<p>In response to previous GAO and Inspector General criticism, TSA is developing a new set of metrics about SPOT, but says it will require at least an additional three years and additional resources to report on the program's performance and security effectiveness. Meanwhile, it is asking for a budget increase to add 584 more BDOs so the program can expand to smaller airports. In other words, to paraphrase a familiar line about the recent federal health-care law, we have to keep running and expanding the program to see if it works.</p>
<p>GAO sums up this comprehensive assessment as follows: "10 years after the development of the SPOT program, TSA cannot demonstrate the effectiveness of its behavior detection activities. Until TSA can provide scientifically validated evidence demonstrating that behavioral indicators can be used to identify passengers who may pose a threat to aviation, the agency risks funding activities that have not been determined to be effective."</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong><a name="b"></a>Airport Slot Transfers and Deregulation</strong></p>
<p>Thirty-five years ago Congress enacted the Airline Deregulation Act of 1978, removing the power of the now-defunct Civil Aeronautics Board to decide which airlines could serve which airports at which fare levels. Competition would replace the heavy, arbitrary hand of government in deciding who flew where. This major policy change followed several decades of research that demonstrated that airlines are not a monopoly like electricity and water supply. Rather, airline service is "contestable."</p>
<p>Alfred Kahn, a principal architect of airline deregulation, often cautioned that freeing airlines was only part of the job. The infrastructure of airports and air traffic control also needed to be opened up to market forces if deregulation was to produce sustainable competition. The fact that government still defines and enforces slots at key airports, as dramatized in the recent Justice Department (DOJ) settlement with American and US Airways, illustrates how much government still intervenes in the market for airline service.</p>
<p>Under the terms of the settlement, it's not just that American and US Airways are required to divest slots and gates at a number of airports. In the cases of Reagan National (DCA) and LaGuardia (LGA), DOJ is attempting to restructure the airline market. First, it is requiring the merged carrier to divest <em>to JetBlue</em> the 16 DCA slots AA currently leases to that airline, and also requiring it to divest <em>to Southwest</em> the 10 slots it leases from AA at LGA. Second, the merged carrier must sell a further 88 slots at DCA and 34 at LGA, but <em>only to airlines approved by DOJ</em>, which says it wants these transactions to "guarantee a bigger foothold for low-cost carriers at key U.S. airports."</p>
<p>This attempt by DOJ to restructure the airline industry is completely at odds with airline deregulation. Instead of allowing market forces to work out the highest and best uses of existing airport capacity, DOJ's central planners seek to impose their vision of what is best. There are all kinds of countervailing views of what is best. The four leaders of the House and Senate transportation committees sent a letter to DOJ last month arguing that all airlines, not just DOJ's favored LCCs, should be able to bid on the divested slots. Their view of the public good favors legacy carriers that use smaller regional jets to link small cities to DCA and LGA, rather than LCCs like Southwest that serve larger cities. But there is no non-arbitrary way to resolve such questions administratively. The DOJ approach inevitably means government picking winners and losers.</p>
<p>And that is an inherent defect of allocating the scarce resource of airport capacity via slots. A far more transparent and market-based way to do this is via runway pricing. To some academic economists, slot auctions and runway pricing are seen as equivalent. But in the real world they are profoundly different. Any proposal to make slots a more effective means of allocating airport capacity runs into the obstacle of incumbents versus new entrants. Although DOT has always maintained that slots are not property and can be changed at any time, incumbents will fight tooth and nail to retain the slots they already have, dooming any slot auction proposal to be tinkering around the edges.</p>
<p>By contrast, airports already charge for runway use, so if a capacity-short airport like DCA or LGA decided to exercise its legal right (under DOT's airport rates and charges policy) to charge congestion-based fees for runway use, those fees would apply to all users&mdash;incumbents, new entrants, and foreign carriers. When DOT changed its rates and charges policy in 2008 to allow such pricing, the airlines challenged it in court&mdash;and lost. So that issue has already been decided.</p>
<p>Here is how a hypothetical system at DCA and LGA might work. For each schedule season (e.g., quarterly), an airport's pricing body would propose a pricing schedule aimed at minimizing delays while complying with FAA guidance on maximum hourly runway use. Airlines would revise their schedules in response, and the pricing body would model the new schedules' impact on congestion, adjusting the price schedule and resubmitting it to the airlines. After several rounds of this discovery process, the final prices and schedules would be set for that season. This iterative process is based on strategic simulations carried out by the FAA-sponsored NEXTOR project on congestion at the New York airports. The process functions as a kind of periodic auction, not of "slots" but of runway capacity. It would also be better for the small numbers of business jets and fractional operators using airports like LGA than any kind of slot system, since those non-scheduled users could gain access in real time based on being willing to pay the current market price to use the runway. All the increased runway revenues could be dedicated to capacity increasing projects.</p>
<p>In my ideal world, an entity such as DOJ would not be telling merging airlines that they must reduce service at any airport, since the pricing approach above would be making those decisions. But even in the current world of DOJ-required reductions, the process of deciding how the freed-up capacity would be used could be done via this kind of pricing system. I am not wise enough to predict whether the JetBlues and Southwests would be willing to pay the price for expanded service at DCA or LGA&mdash;or whether legacy carriers like Delta and United would pay more. But I do think a pricing system would shift some of the air service now using DCA and LGA to outlying airports that also serve the respective metro areas. And that is how it should be. The runway capacity at DCA and LGA is a scarce resource, and should be allocated via market pricing, not central planners' designs. A runway pricing system is the only practical way to do this.</p>
<p>And were Alfred Kahn still with us, I'm sure he would agree.</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong><a name="c"></a>Is the Proposed Increase in TSA Security Fee Actually a Tax?</strong></p>
<p>Both the House Republicans and the Senate Democrats are supporting an increase in the current $2.50 per segment passenger security fee, which generates revenue that pays for a portion of TSA's $5.2 billion aviation security budget. The airlines are up in arms, attacking the proposed increase as a tax increase in disguise. Airlines for America has recruited the Air Line Pilots Association, the Global Business Travel Association, IATA, Consumer Travel Alliance, and the Regional Airline Association to help fight the proposed increase.</p>
<p>The Senate has passed a 2014 budget that includes the White House proposal to replace the current $2.50 per segment fee with a flat $5.00 per one-way trip, increasing by 50&cent;/year through 2019, when it would reach $7.50. That would raise $25.9 billion over 10 years (averaging $2.9 billion/year). The House Budget Committee's 2014 budget includes a milder version&mdash;just a one-time switch to $5.00 per one-way trip, with no planned increases thereafter. CBO estimates that the House version would raise an additional $11 billion over 10 years ($1.1 billion/year).</p>
<p>A4A attacks both proposals as only adding to the tax burden on airlines and passengers, reducing (at the margin) the number who choose to travel by air. (I will leave aside the inconsistency of airlines' significant increase in fees for things like checked and carry-on bags, which apparently don't suppress demand.) A4A president Nick Calio's recent op-ed in <em>The Hill</em> makes two other points. TSA provides some degree of security for other modes of transportation, but only airlines and their passengers have to pay for this; the others get TSA services at no charge. Also, TSA would be providing no additional services to airlines or passengers in exchange for the increased fee level.</p>
<p>But nowhere in any of the airline material have I seen any mention of what I think is the strongest argument against the proposed fee increase. Jeff Davis of <em>Transportation Weekly</em> pointed out the dirty little secret of these proposals in his Nov. 26<sup>th</sup> issue. As he explains, the existing $2.50/segment fee is categorized as a "discretionary offsetting collection." That means the $2 billion a year it generates is subtracted from TSA's $5.2 billion aviation security budget, for a net budgetary cost of $3.2 billion. "But in order to make sure that any fee increase goes to deficit reduction, the Ryan budget assumed that the increased portion of the fee would be classified as mandatory receipts or revenues, deposited in the general fund, and could not be used to offset any TSA spending."</p>
<p>Bingo&mdash;the increase is a tax, not a user fee. The proceeds of the increase go into the general fund, to reduce the deficit. The same is true of the Administration proposal adopted by the Senate majority. I know the explanation is arcane, but there it is in black and white. Both House Republicans and Senate Democrats actually are trying to dress up a tax increase in user-fee clothing. They are singling out this one industry for a special tax to reduce the deficit. The airlines and their coalition should make this point explicitly.</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong><a name="d"></a>Expanding US Aviation Capacity</strong></p>
<p>The Eno Center for Transportation last month released a good report called "Addressing Future Capacity Needs in the U.S. Aviation System," funded in part by the U.S. Travel Association. (Go to: <a href="http://www.enotrans.org/store/research-papers/capacity-needs-aviation"><span>www.enotrans.org/store/research-papers/capacity-needs-aviation</span></a><span>)</span></p>
<p>Based on the latest FAA aviation forecast, it identifies a need for significant expansion of capacity, at major airports as well as in the air traffic control system. After providing some useful context, the report presents case studies of the capacity problems at four major international hubs: Kennedy (JFK), Newark (EWR), Los Angeles (LAX), and San Francisco (SFO). All four will need additional capacity, but have serious physical as well as political constraints. The report offers a useful discussion of policies, in addition to adding physical runway and terminal space, that could help.</p>
<p>In terms of operational changes, it contrasts the regulatory approach with a pricing approach, and finds advantages in the latter, while acknowledging likely opposition. One way to counter opposition might be a congestion-relief discretionary grant program (as part of a reformed Airport Improvement Program). Like the DOT's generally successful Urban Partnership Agreement competition from last decade for surface transportation, it would offer competitive grants for airports willing to implement some form of pricing for congestion relief. The report also highlights how various airspace and procedural improvements from FAA's NextGen program could increase the effective capacity of existing airport runways. And it points out that AIP grants go disproportionately to "non-primary" airports that handle just 0.25% of all airline passengers.</p>
<p>The report concludes by offering four main policy recommendations. First, restructure the AIP grant program to focus more on major airports where improvements are most needed and would yield the greatest national benefits. Second, use part of AIP monies for a competitive program to help airports implement congestion-reducing measures such as pricing. Third, explore separating the ATC function from the FAA, to enable the NextGen modernization to be done in a more commercial manner. And fourth, reduce current restrictions on airport use of locally imposed passenger facility charges (PFCs)&mdash;at a minimum, give FAA the discretion to permit increases above the current $4.50 cap for projects that would accommodate increased demand.</p>
<p>By and large, these are sound recommendations, though all of them face serious political obstacles. While I think the odds of commercializing the FAA's Air Traffic Organization are increasing, the airport recommendations look less likely to gain a critical mass of congressional support. The most likely one, in my view, would be to allow airports to implement higher PFCs. As the exact opposite of a "federal tax increase," an expanded local self-help charge should appeal to the growing number of those in Congress who want to devolve functions from the federal government to state and local entities.</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong><a name="e"></a>Armed TSA Screeners? No, Thanks!</strong></p>
<p>After the tragic shooting last month at a checkpoint at LAX, in which three TSA screeners were shot, one fatally, the immediate response of TSA union president David Cox was that TSA's workforce should be expanded to include a new category: armed officers with law enforcement status, to protect all checkpoints from such attacks. The new officers would be stationed on raised platforms allowing them to survey the whole checkpoint area. And on top of that, the union is calling for more Behavior Detection Officers, despite there being zero evidence that BDOs can spot people with mal-intent (see previous story).</p>
<p>As many observers pointed out, those who are intent on mayhem can easily choose other targets than screening lines if they want to cause trouble. The advantage of existing law enforcement officers on duty at airports is precisely that they can and do roam, covering ticket lobbies, curbside areas, baggage drop-offs, etc. in addition to checkpoints.</p>
<p>The union's knee-jerk reaction is typical of political responses to aviation security incidents. The focus is on making 100% certain that this particular incident cannot occur again. But as numerous security experts keep reminding us, there is no 100% security at any conceivable amount of spending, If airports were made 100% secure at huge costs, other targets would be favored: railroad bridges, electrical transmission lines, sports stadiums on game days, shopping malls (as in Kenya), etc. As MIT aviation safety expert Arnold Barnett told the <em>New York Times</em> after the LAX shooting, "Wherever you establish a security perimeter, by definition there is stuff outside it."</p>
<p>TSA has already grown far beyond the original concept, and mission creep is an ever-present temptation for a host of interests&mdash;not just screener unions but equipment vendors, the TSA bureaucracy, and congressional oversight committees. Let's hope everyone can keep their heads and not implement yet another so-called layer of costly, ineffective security theater.</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><a name="f"></a><strong>News Notes</strong></p>
<p><span style="text-decoration: underline;">Brazil Privatizes Two More Airports</span>. Last month Brazil announced the winners in the bidding for the Galeao International Airport in Rio de Janeiro and Tancredo Neves International in Minas Gerais. The Rio airport will be leased for 25 years to a consortium of construction giant Odebrecht and Changi Airport Group, which bid $8.6 billion. The Minas Gerais airport went to Brazil's CCR, for 30 years, for a bid of $827 million. State-owned airport agency Infraero will hold 49% of each airport enterprise.</p>
<p><span style="text-decoration: underline;">Las Vegas Solution to TSA Exit Lane Decision</span>. The TSA's recent decision to stop providing staffing for the exit lanes from the secure portion of airport terminals, while still requiring that entry there be prevented, has left many airports complaining about a costly unfunded mandate. McCarran International Airport in Las Vegas has decided to automate this function, with TSA's approval. The automated exit lane gate system is already in use at the airport's newest terminal (T-3) and will be added at the other terminals. The system provides real-time notification to security personnel of any attempts to enter the terminal via the equipped exit lanes.</p>
<p><span style="text-decoration: underline;">Moody's Sees Growth at Major Hubs</span>. Rating agency Moody's last month released its FY 2012 US airport medians report on airports whose bonds it rates. The figures show continued growth at large hubs but slight down-trends continuing at medium and small hubs. There was also a slight improvement in airport liquidity compared with FY 2011, with cash on hand increasing to 522 days of operating expenses, compared with 511 days the year before.</p>
<p><span style="text-decoration: underline;">Value of Time Lost to Passenger Screening</span>. For a recent Reason Foundation blog post, I discussed the time passengers have to spend waiting in TSA screening lines. Currently, about 550 million passengers begin trips at US airports each year. If the average delay, compared with pre-TSA days, is 15 minutes, that amounts to 137.5 million hours per year. What is the economic value of that lost time? Let's assume that the average business traveler's lost time is valued at $50/hour and the average leisure traveler's time is $15/hour. Since business travelers are about 50% of the daily airport throughput, that leads to a total imposed cost of just under $4.5 billion a year. And that does not count the additional time that many people have learned to add to the beginning of their trips (buffer time) to minimize the odds of missing their flight if the lines are longer than usual on the day they fly. If that is an additional 15 minutes on average, the total economic cost of the time lost due to TSA screening is $9 billion a year.</p>
<p><span style="text-decoration: underline;">Landmark Noise Settlement Approved in Fort Lauderdale</span>. The battle to achieve a workable settlement in the long-running noise compensation case over FLL's runway extension has been settled, thanks to an 8-0 vote by the Broward County Commission approving the deal worked out with the city of Dania Beach. The runway extension has been under construction for most of this year, but the terms of the settlement were still being ironed out by county and city negotiators, since the FAA had rejected the initial settlement. Airport Director Kent George told local media that FAA was involved in crafting the settlement, which he hopes will mean agency approval.</p>
<p><span style="text-decoration: underline;">Traffic-Short Rome Airport Gains New Airline</span>. Cutbacks at struggling Alitalia Airlines have threatened planned expansion plans at Rome's privatized Fiumicino Airport. But last month saw an announcement by Spain's up-and-coming low-cost carrier Vueling that it will establish its second-largest base at the airport. Vueling will base eight A320s there, and plans to serve up to 550 city-pairs via Fiumicino. Its current Barcelona hub serves 1,200 routes.</p>
<p><span style="text-decoration: underline;">PreCheck Expanding to All Military</span>. TSA announced on November 13<sup>th</sup> that PreCheck screening will be available to all armed forces service members effective Dec. 20<sup>th</sup>. This includes members of the Coast Guard, Reserves, and National Guard. PreCheck is now available at 100 US airports. Active-duty military will submit their DoD identification number when making flight reservations, and the TSA system will define it as their Known Traveler Number.</p>
<p><span style="text-decoration: underline;">Privatize TSA Functions, Says Cato Institute Report</span>. A policy study from the Cato Institute recommends that the TSA's functions be divested to other entities, including the devolution of airport screening to individual airports. That would follow policies in most of Europe that make airport screening the responsibility of each airport, under the supervision of national security authorities. Most European airports outsource screening to certified screening companies. (<a href="http://www.cato.org/publications/policy-analysis/privatizing-transportation-security-administration">http://www.cato.org/publications/policy-analysis/privatizing-transportation-security-administration</a>)</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong><a name="g"></a>Quotable Quotes</strong></p>
<p>"This report [GAO-14-159] represents a serious indictment of TSA's Screening of Passengers by Observation Techniques program. With a single report, GAO has displayed that the science behind the program is non-existent and that the study TSA cites in defending the program was fundamentally flawed. Given TSA's unwillingness to concur with GAO's recommendation that the agency limit funding for the program until it could be proven, it is now up to Congress to take a hard look at reprioritizing the funding for this program. I trust that my colleagues will do just that."<br /> &mdash;Rep. Cedric L. Richmond (D, LA), quoted in "TSA Behavior Detection Program Should Be Defunded," news release, Committee on Homeland Security &ndash; Democrats, Nov. 13, 2013</p>
<p>"The FAA defines primary airports as having more than 10,000 passenger boardings each year. . . . While only 0.25 percent of enplanements occur at non-primary airports, . . . 35 percent of AIP grants are obligated to non-primary airports. This is a clear misallocation of resources, given that the federal interest in the nation's aviation system should be in making investments with the greatest national benefits. It is highly unlikely that these non-primary airports, which are receiving approximately $1.35 billion annually while carrying only 1.8 million annual passengers, are the best investment of scarce resources."<br /> &mdash;Joshua Schank, et al., "Addressing Future Capacity Needs in the U.S. Aviation System," Eno Center for Transportation, November 2013</p>
<p>"[G]iven the rarity of attacks like the one at LAX, none of these steps may save a single life. They make about as much sense as putting the National Guard in movie theaters in the wake of the Aurora, Colorado massacre. Actually, they make less sense, in light of the risks of introducing thousands of guns into small, crowded spaces filled with people who really hate being there. . . . Equipping screeners with deadly weapons would also heighten the sense of coercion and intrusion that makes air travel resemble admission to a medium-security prison. Being ordered around and physically groped by a uniformed officer is bad, but it would be worse if he had a Glock on his hip."<br /> &mdash;Steve Chapman, "The Folly of Arming TSA Agents," Nov. 7, 2013 (<a href="http://www.reason.com/archives/2013/11/07/the-folly-of-arming-tsa-agents">www.reason.com/archives/2013/11/07/the-folly-of-arming-tsa-agents</a>)</p>
<p><a href="#top">&raquo; return to top</a></p>1013650@http://www.reason.orgWed, 04 Dec 2013 21:10:00 ESTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #95http://www.reason.org/news/show/airport-policy-and-security-news-95
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">TSA security rationale in question</a></li>
<li><a href="#b">O'Hare's congestion-reducing runway revamp</a></li>
<li><a href="#c">Expanding <span class="SpellE">PreCheck</span> prompts criticisms</a></li>
<li><a href="#d">Fresh thinking on aviation issues</a></li>
<li><a href="#e">Another try for a 2<sup>nd</sup> Atlanta airport</a></li>
<li><a href="#f">Airport privatization news from Europe</a></li>
<li><a href="#g">News Notes</a></li>
<li><a href="#h">Quotable Quotes</a></li>
</ul>
<p><span><strong><a name="a"></a>TSA Documents Undercut Its Security Rationales</strong></span></p>
<p><span>A couple of years ago Jonathan Corbett, a tech entrepreneur from Miami, posted videos online showing him successfully passing through TSA airport body scanners with a metal box concealed under his clothing, seeking to demonstrate that the scanners are an ineffective replacement for walk-through metal detectors for primary screening. In 2010 he filed a lawsuit contending that <span class="GramE">body-scanning</span> and pat-downs are both unreasonable searches that violate the Fourth Amendment.</span></p>
<p><span>As part of the discovery process, TSA provided Corbett with 4,000 pages of documents, many of them classified. He was allowed to produce two versions of his brief, one containing extracts of classified material, and available only to the court, and a heavily redacted <span class="GramE">version which</span> could be made public. But as several news sites reported last month, a clerk in the US Court of Appeals (11<sup>th</sup> District) mistakenly posted the classified version online, and it was quickly noticed and reproduced on various websites. Although the court issued a gag order prohibiting Corbett from talking about the classified material, there was no way to stop others from doing so.</span></p>
<p><span>Among the things we've learned from TSA Civil Aviation Threat Assessments that Corbett cited in his brief are the following:</span></p>
<ul type="disc">
<li>"As of mid-2011, terrorist threat groups present in the Homeland are not known to be actively plotting against civil aviation targets or airports; instead, their focus is on fund-raising, recruiting, and propagandizing."</li>
<li>No terrorist has attempted to bring explosives onto an aircraft via a U.S. airport in 35 years, and even worldwide, the use of explosives on aircraft is "extremely rare."</li>
<li>There have been no attempted domestic hijackings of any kind since 9/11.</li>
<li>The government concedes that it would be difficult to repeat a 9/11-type attack due to strengthened cockpit doors and passengers' willingness to challenge would-be hijackers.</li>
</ul>
<p>Based on these points, Corbett argues that primary-screening searches via body-scanners or pat-downs are unreasonable under the Fourth Amendment. He agrees that although those searches have not turned up any would-be terrorists, they have detected illegal drugs. But that is irrelevant to aviation security, which is the only purported rationale for such intrusive searches without prior probable cause.</p>
<p>Corbett does not directly address whether the whole array of TSA airport screening measures may have deterred attacks that might have happened without those measures in place. But that is the kind of question that can be&mdash;and has been&mdash;assessed quantitatively by security experts such as Mark Stewart and John Mueller, whose work I have cited several times in previous issues of this newsletter. And those assessments suggest that body scanners and Federal Air Marshals, among other measures, cost vastly more than they are worth.</p>
<p>Whatever the outcome of Corbett's suit&mdash;and I hope he prevails&mdash;Congress needs to take a hard look at the cost-effectiveness of much of what TSA is doing, in light of the revelations inadvertently made public by this case.</p>
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<p><strong><a name="b"></a>Latest Runway Will Reduce Delays at O'Hare</strong></p>
<p>Apart from the three main New York City airports, Chicago O'Hare in recent decades has been among the largest sources of system-wide air traffic delays and congestion. During the first seven months of 2013, ORD ranked last in on-time departures (only 67%) among the 29 busiest U.S. airports. But a new runway that opened last month at ORD seems likely to offer significant delay reductions, not only at the airport itself <span class="GramE">but</span> throughout the Northeast and Midwest.</p>
<p>The new east-west 10,800 ft. runway 10C/28C is the latest result of an $8 billion plan that is both reconfiguring ORD's runways and adding significant capacity. The overall plan calls for replacing an old-fashioned set of intersecting runways with six parallel east-west runways and two crosswind ones. The six east-west parallels will permit more landings and take-offs per hour during low-visibility conditions in addition to more total capacity under all weather conditions. Specifically, the addition of 10C/28C will permit 26% more landings from the east during instrument conditions (from 84 per hour to 106). Since it is low-visibility conditions that have led to the worst delays, that improvement is huge. And during good visibility conditions, there should be a whopping 50% increase in takeoffs to the west (from 100 per hour to 150).</p>
<p>Those improvements are especially welcomed by smaller communities served by regional airlines as spokes feeding the American and United hubs at ORD. During bad weather, when airline dispatchers have to practice triage, it is typically the small jets and turboprops on such spoke routes that get delayed the most, so that larger planes carrying many more passengers to and from more distant cities can be expedited. "For a lot of these small communities, it's going to be huge," said airport consultant (and former head of Airports Council International-North America) Greg Principato.</p>
<p>The overall runway project has had to overcome an array of obstacles, including airline concerns over its cost and neighborhood opposition. To build the new 10C/28C, for example, required the replacement of a cemetery with 1,500 graves, plus relocating a railroad line, a waterway, two cargo facilities, and an aircraft fueling station. The cemetery issue alone took several years of litigation to resolve. I have not studied the details of how Chicago overcame these obstacles, but it's likely there are lessons for other airports that need additional runway capacity.</p>
<p>Still to come, if funding can be worked out, are the final two parallel runways plus an additional control tower. One of those runways is already under construction, as is the control tower, which will be ORD's third. That tower addition is unfortunate, in that the FAA is still operating on 20<sup>th</sup>-century principles that require controllers to have "out-the-window" views of all the runways they are in charge of. Yet the FAA and overseas air navigation service providers have demonstrated that tower functions can be provided safely and reliably from a remote tower location that is fed by various kinds of sensor data from distant runways. The first such remote towers will go into service in Norway and Sweden within a few months. I'm surprised that the major airlines that have questioned the cost of the overall ORD runway project did not raise this issue when the third tower was being approved.</p>
<p>Overall, though, the O'Hare runway modernization is good news for air travelers and the airlines that serve them.</p>
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<p><strong><a name="c"></a>Expanded <span class="SpellE">PreCheck</span> Raising Questions</strong></p>
<p>In addition to the good news that Southwest is joining the <span class="SpellE">PreCheck</span> program this month, there have been alarms sounded by various privacy and civil liberties groups about the program's expansion beyond airline frequent-flyer program members. These concerns were triggered by the Department of Homeland Security's Sept. 10, 2013 <em>Federal Register</em> notice describing the changes. Comments were due 30 days later.</p>
<p>In brief, what DHS has proposed is a revision in how it will use the Secure Flight system, under which it took over from airlines (as of November 2010) the task of matching all air travelers' name, gender, and date of birth with several watch lists of actual and suspected terrorists. That was a sensible move, which included standardizing the passenger name record information that airlines collect, to minimize false matches with names on the watch lists; it also kept watch-list information more secure. The change outlined in the <em>Federal Register</em> notice is that for all air travelers TSA will henceforth combine the Secure Flight data with airline frequent flyer information to sort air travelers, each time they fly, into three groups: those eligible for expedited (<span class="SpellE">PreCheck</span>-type) screening, those who will get regular screening, and those who need enhanced screening.</p>
<p>So far, so good, as far as I'm concerned, since that is the basic information and process needed in order to operate a risk-based approach to airport passenger screening. The notice goes on to explain that&mdash;again, in accordance with good risk-based design&mdash;an element of randomness will be included, such that those who would normally qualify for expedited screening will occasionally be assigned to standard screening or even enhanced screening. And it further goes on to note that TSA may use intelligence information to give greater scrutiny to a particular flight, which could increase the extent to which passengers on that flight receive non-expedited screening.</p>
<p>Some of the objections to expanded <span class="SpellE">PreCheck</span> are objections to the basic principle of risk-based screening. One silly objection, raised in a <em>Washington Post</em> op-ed by Christopher Elliott, is the odious nature of "a line for elite travelers who can afford to pay a fee." This refers to the planned introduction by TSA of a five-year "membership" in <span class="SpellE">PreCheck</span> for $85. Anyone who cannot afford $17 a year for faster screening very likely cannot afford to be taking airline trips at all, or doesn't mind spending time waiting in long lines. (And presumably also objects on principle to express toll lanes, <span class="GramE">Express</span> Mail, first-class cars on Amtrak trains, and Starbucks as a pricey alternative to Dunkin Donuts.)</p>
<p>Somewhat more troubling <span class="GramE">are</span> some of the points raised in an Oct. 21 <em>New York Times</em> news article by Susan Stellin. She reports interviewing an unnamed TSA official about what information will be used, and how:</p>
<ul type="disc">
<li>If an airline has a passenger's passport number on file as part of the passenger name record, it is required to share that information with TSA, even for a domestic flight. <em>My response:</em> no big deal; this will further reduce false matches to watch lists.</li>
<li>When you submit your fingerprints to DHS for the Global Entry program or for TSA's forthcoming $85, five-year <span class="SpellE">PreCheck</span> membership, the FBI will check those fingerprints against its criminal history databases, including one on unsolved crimes. <em>My response:</em> that's what a background check is supposed to do, and it's what all airport employees with access to secure areas of airports must pass. </li>
<li>There is also a TSA <span class="SpellE">PreCheck</span> disqualification list, containing names of people "accused of violating security regulations, including disputes with checkpoint or airline staff members." <em>My response:</em> Here things start getting dicey, since it includes people "accused" as opposed to "convicted." However, remember that this means only that the person will not be in the group getting expedited screening.</li>
</ul>
<p>But with any such programs that will involve large numbers of people (and TSA is aiming to enroll 25% of daily air travelers in <span class="SpellE">PreCheck</span> by the end of next year), it is only fair to have a serious redress process, by which those excluded from expedited screening can find out if incorrect information was used, and if it was, get it corrected. DHS has such a process, but it's not clear how well it works. This might be a worthwhile topic for review by the Government Accountability Office.</p>
<p>I cannot close without commenting on another concern <span class="GramE">raised</span> in the <em>Times</em> article. Privacy critics are attacking expanded <span class="SpellE">PreCheck</span> by objecting to the fact that "secret computer rules, not humans, make these determinations." But the very same people would also be objecting if "subjective human judgment" <span class="GramE">was</span> being used for this purpose. What these people disagree with is risk-based security, per se&mdash;not how it is being implemented.</p>
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<p><strong><a name="d"></a>Fresh Thinking about Airports and Airlines</strong></p>
<p>Some of the best ideas about aviation that I've encountered over the years have come from professionals who have recently retired. I'm talking about long-time airport directors, senior FAA officials, and heads of aviation trade associations. These people know the flaws and problems in aviation in great detail, but while in their official positions they were constrained from telling it like it is. Now out of office, they can speak truth to power.</p>
<p>A good example is a speech given October 21<sup>st</sup> at the DePaul International Aviation Law Institute by Greg Principato, who recently stepped down as head of Airports Council International-North America. As I read the text, in five or six places I marked "quotable quote" in the margin, and a brief summary here can't do the speech justice. But let me give you a few highlights.</p>
<p>One of Greg's key points is that US aviation policies are sadly out of step with those of other developed nations. That's true of airport finance (relying on regulation-encrusted federal grants rather than a locally determined per-passenger charge as in most other countries), airport governance (where privatization and public-private partnerships are producing better airports in Europe, Latin America, and Australasia), air traffic control (where he staffed the 1993(!) <span class="SpellE">Baliles</span> Commission that called for a self-funded ATC corporation, which we still don't have), and the misleading calls by the airline industry for relief from being "over-taxed like alcohol and tobacco."</p>
<p>On the perennial battle between US airlines and US airports over passenger facility charges (PFCs), instead of just repeating old arguments, Greg makes a case that airline opposition to a larger role for PFC funding is irrational. In fact, he says, "airlines want airports to use the PFC on projects they support." But in many cases, where existing PFC revenues have all been pledged to support revenue bonds for previous projects, the only alternative for the desired new project may be increased rates and charges for all airlines serving the airport. I really think the time has come for airlines and airports to bury the hatchet and reach consensus on increased PFC levels, especially given the likely shrinkage of federal AIP grants in coming years.</p>
<p>The speech has not been put online, as far as I know. But if you would like to read it, I will forward your request to Greg, who I'm sure will be glad to email it to you.</p>
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<p><strong><a name="e"></a>Another Try for a Second Atlanta Airport</strong></p>
<p>Metro Atlanta is America's largest metro area served by only one commercial airport. Affluent Gwinnett County, a northeastern suburb, last year attempted to privatize its general aviation airport under a plan proposed by New York-based Propeller Investments. But that plan was defeated by NIMBY opposition to the anticipated traffic and noise that scheduled airline service was expected to bring, despite many other residents welcoming an alternative to the long drive to Delta-dominated Hartsfield-Jackson International Airport.</p>
<p>But on October 4<sup>th</sup>, officials in Paulding County, a northwestern suburb, announced an agreement in principle with Propeller Investments to develop Paulding Northwest Atlanta Airport into a commercial-service airport to be called Silver Comet Field. Propeller said it is in talks with "several" commercial airlines about offering service to the airport with planes the size of Boeing 737s. The Paulding County Airport Authority is nearly finished developing a 23,000 sq. ft. passenger terminal and has begun work on extending the length of the runway. Propeller also has an option on 60 acres of land adjacent to the airport to be used for aviation-related business activity (while also serving as a noise-exposure buffer zone).</p>
<p>While Paulding County has only 142,000 residents, it is one of the country's fastest-growing counties. The airport itself opened in 2008, as part of the county government's commitment to economic development. The airport is just off US 278 with easy access to I-20 in the area the City of Atlanta had originally intended as the site of a second airport for the metro area. About one million people live within 25 miles of the airport, and 4.5 million live within 50 miles.</p>
<p>Rather than pursuing a privatization agreement under the federal Airport Privatization Pilot Program, Propeller has entered into two long-term lease agreements with the Airport Authority: one for the terminal building and the other an option to lease the adjacent 60 acres of land. The agreements give Paulding County the landing fees, taxes on aircraft based at the airport, a percentage of gross revenue, ground rental income from Propeller, and terminal sales tax revenue.</p>
<p>Delta, to no one's surprise, is vigorously opposed to the plan, just as it was to the Gwinnett County plan. Delta CEO Richard Anderson said that he and Atlanta Mayor <span class="SpellE">Kaeim</span> Reed "will work together to oppose any investment in that facility." The Paulding airport needs FAA approval to offer commercial service, as well as TSA screening for passengers and bags, a perimeter fence, and other security provisions.&nbsp; According to an article in the <em>Atlanta Journal-Constitution</em>, Delta's Anderson "indicated that Delta would seek to block such funding requests for the Paulding airport."</p>
<p>Assuming that the airport gains FAA and TSA approvals, which airlines might it attract? Since Southwest moved into Hartsfield-Jackson via its purchase of AirTran, the best prospects for Silver Comet would appear to be ultra-low-cost carriers such as Allegiant, Spirit, and the revamped Frontier, which is being acquired by Indigo Partners (which plans to turn it into an ultra-LCC). That outcome would offer metro Atlanta residents a very different air-service alternative to Hartsfield-Jackson.</p>
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<p><strong><span style="font-family: "><a name="f"></a>Airport Privatization News from Europe</span></strong></p>
<p><em>The information below (which is believed to be correct at the time of writing) and comment is by David J Bentley of Big Pond Aviation, Manchester, UK. <a href="mailto:djb&#64;djbentley.fsbusiness.co.uk">djb&#64;djbentley.fsbusiness.co.uk</a></em></p>
<p><span style="font-family:">Germany's <span class="SpellE">Hochtief</span> AirPort looked as if it might be a name that would disappear after its main airport assets were acquired by a subsidiary of Canada's Public Sector Pension Investment Board (PSP Investments) earlier this year. That is the case, but <span class="SpellE">Hochtief</span> still remains active in the sector. It changed its name to <span class="SpellE">AviAlliance</span> at the end of October. <span class="SpellE">AviAlliance</span> continues to hold shares in a wide range of airports in Europe, namely Athens, Budapest, D&uuml;sseldorf, Hamburg and Tirana (Albania). Athens Airport has ridden out the storm of the country's sovereign debt crisis, and enduring tourism to Greece has seen a recovery of sorts. D&uuml;sseldorf, the main airport serving the industrial Rhineland area, has become Germany's third-busiest airport, though still some way behind Frankfurt (which serves Germany's financial <span class="SpellE">center</span> as well as being the centrally located hub) and Munich (which serves the richest region in Europe &ndash; Bavaria). German airports overall grew passenger traffic by 2.1% in September<span class="GramE">;</span> not a bad figure when you take into account the lingering Euro zone recession and high airport taxes. All-in-all <span class="SpellE">AviAlliance</span> continues to be invested in a solid base of airports although it is no longer involved at Australia's Sydney airport, since PSP Investments previously acquired that stake as a direct shareholding. None of this changes the status of <span class="SpellE">Hochtief</span> Airport Capital, a supporting fund </span><span style="font-family: ">comprising two Australian funds (Utilities Trust of Australia managed by Hastings and The Future Fund), along with <span class="SpellE">Caisse</span> de <span class="SpellE">d&eacute;p&ocirc;t</span> et placement du Qu&eacute;bec (Canada) and <span class="SpellE">KfW</span> IPEX-Bank GmbH (Germany), the latter of which claims to be the world's first investment partnership in the airport sector. </span></p>
<p><span style="font-family:">Heathrow Airport Holdings (BAA from 1985 until last year) has been off-loading airports since 2009, under pressure from the Competition Commission, starting with London Gatwick airport in that year, Edinburgh Airport in 2012 and London Stansted Airport in February of this year. At the same time <span class="SpellE">Ferrovial</span>, the principal shareholder in FGP Topco, HAH's owner, has reduced its equity in HAH to just 25% as it readies itself for the (eventual) privatisation of AENA in its homeland, Spain. The latest investor is the UK's Universities Superannuation Scheme, which took 8.65% of <span class="SpellE">Ferrovial's</span> share of FGP Topco in October. This leaves Heathrow Airport ("the UK's only hub airport" as Heathrow's CEO Colin Matthews tells us tirelessly) being owned by a wide-ranging consortium of investors from pension, investment, and sovereign wealth funds from Europe, North America, the Middle East, and Asia.</span></p>
<p><span style="font-family:">The latest twist, and not a surprising one given the speculation since the conclusion of the Stansted sale, is that HAH has had talks with advisors with a view to seeking buyers for its three remaining non-London airports: Southampton (on the English south coast) as well as Glasgow and Aberdeen, both in Scotland. Of the three, Aberdeen looks the most tempting, being at the <span class="SpellE">center</span> of what remains of the British North Sea oil and gas industries (with potentially more reserves to be discovered) and of the nascent alternative energy (wind/wave) and carbon capture industries, and with airline yields to match. When these three airports go, HAH will have finally been broken up, as many will argue BAA should have been in the mid-1980s, though even free-market champion Prime Minister Margaret Thatcher could not have envisaged, when BAA was floated, that its de-listed successor might be owned by seven different entities from across the globe.</span></p>
<p><span style="font-family:">Owners have finally been found for <span class="SpellE">Infratil's</span><strong> </strong>ailing Glasgow Prestwick and <span class="SpellE">Manston</span>, Kent airports, which have been on the market for over a year at &pound;10 million apiece. The Scottish government will take Prestwick Airport into government ownership, several private investors having reportedly expressed interest while declining to commit to a proposed timescale. Prestwick is the second airport to go that way recently, Cardiff Airport having gone through a reverse privatization to the Welsh government last year. Coincidentally, <span class="SpellE">Manston</span> Airport has been acquired for &pound;1 by a well-known Scottish Entrepreneur, Ann <span class="SpellE">Gloag</span>, who was <span class="GramE">once</span> involved with Stagecoach, the bus operator that owned Prestwick Airport before <span class="SpellE">Omniport</span> and then <span class="SpellE">Infratil</span>.</span></p>
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<p><strong><a name="g"></a>News Notes</strong></p>
<p><span class="GramE"><span style="text-decoration: underline;">TSA Resumes Outsourced Screening Program</span>.</span> Late last month TSA issued a solicitation for approved airport screening companies to bid on four separate contracts to provide passenger and baggage screening at four Montana airports: Bert Mooney, Bozeman Yellowstone, Glacier Park, and Yellowstone Regional. This is the first solicitation since TSA was required by Congress in 2012 to resume taking applications and awarding screening contracts. Whether there will be bidders remains to be seen; the language in the solicitation says this procurement is a "100 percent small business set-aside."</p>
<p><span class="GramE"><span style="text-decoration: underline;">Manchester Developing an "Airport City"</span>.</span> Corporatized Manchester Airport, the UK's third-largest airport, has announced an &pound;800 million joint venture to develop adjacent real estate into an Airport City. The site offers 5 million square feet and has been designated by the government as an Enterprise Zone. Partnering with the airport are Beijing Construction Engineering Group, Carillion PLC, and the Greater Manchester Pension Fund.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Orlando Airport OKs $1 Billion Expansion</span>.</span> The Greater Orlando Aviation Authority has approved a plan to double the size of Orlando International (MCO), including a new baggage system, a people mover, and a second terminal. But the plan's elements require the achievement of various levels of annual passengers before the projects begin. Eight of MCO's airlines supported the plan, but Delta and Southwest opposed it.</p>
<p><span style="text-decoration: underline;">CLEAR Integrates Operations with <span class="SpellE">PreCheck</span></span>. Last month front-of-the-line company CLEAR announced that it has made changes at its nine airports to escort members who are also in <span class="SpellE">PreCheck</span> to the separate <span class="SpellE">PreCheck</span> screening lane. Given that lines are beginning to occur at some <span class="SpellE">PreCheck</span> entry points as that program expands, there is more of a case for belonging to both programs. CLEAR is in place at DEN, DFW, HOU, HPN, IAH, MCO, SAT, SFO, and SJC.</p>
<p><span class="GramE"><span style="text-decoration: underline;">Seven Mayors Endorse AA/US Merger</span>.</span> The mayors of Charlotte, Chicago, Dallas, Fort Worth, Miami-Dade County, Philadelphia, and Phoenix have sent a joint letter to Attorney General Eric Holder asking the Justice Department to "reconsider this ill-conceived lawsuit" against the merger of American and US Airways. Among other things, they point out that if the merger is forbidden, their hub airports will be at a disadvantage to Atlanta, Newark, and other hubs operated by carriers that have merged over the past decade.</p>
<p><span style="text-decoration: underline;">Brown Field Project Gets a Green Light</span>. The public-private partnership to convert San Diego's Brown Field Municipal Airport from a GA-only airfield to a Metropolitan Airpark won approval from the city council last month. As I outlined in an article in the July issue, the airport's 880 acres offer ample room for the proposed $900 million airpark development over the next 20 years. Phase 1 of the project includes <span class="GramE">a</span> 117,000 sq. ft. FBO, 10 large-aircraft hangars, 45 small-plane hangars, and storage and support facilities, including a restaurant.</p>
<p><span style="text-decoration: underline;">Gary Selects AFCO for PPP Deal</span>. The Gary/Chicago Airport Authority selected Aviation Facilities Company (AFCO) as the preferred developer to revamp the money-losing airport. The next step is to negotiate a contract, which the Authority hopes will have AFCO committing to invest or attract $100 million into the airport. AFCO has developed and operated commercial facilities at a number of airports, including Los Angeles International and San Diego International.</p>
<p><span style="text-decoration: underline;">Liquids Rules to be <span class="GramE">Eased</span> in Europe Next Year</span>. If all goes according to plan, as of January 2014 passengers will be able to purchase duty-free liquids in normal-size containers and transfer through a European airport without risk of the items being confiscated. Under new rules, such liquids must be sealed in tamper-proof bags and screened by specialized scanners. ACI-Europe's Olivier <span class="SpellE">Jankovec</span> sees the move as an important first step toward a more passenger-friendly regime for carry-on liquids.</p>
<p><span style="text-decoration: underline;">Guide to Collaborative Contingency Planning Released</span>. The Airport Cooperative Research Program has released a guide to planning for better service to passengers during emergencies. ACRP Report 65 is Guidebook for Airport Irregular Operations Contingency Planning. Information is on the Transportation Research Board website at <a href="http://www.trb.org/Publications/Blurbs/166569.aspx">www.trb.org/Publications/Blurbs/166569.aspx</a>.</p>
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<p><strong><a name="h"></a>Quotable Quotes</strong></p>
<p>"So what exactly do we need the TSA for? Why do we need the ridiculous 'shoes off' rules, why do we need to bother about liquids and gels, why must our laptops be out of our bags? <span class="GramE">. .</span> . Well, now we know the truth. There are no terrorists for the BDOs and VIPRs to detect, and, indeed, the TSA would be the most surprised of us all if it ever found one. It doesn't think they exist. We've spent hundreds of billions of dollars, and made our lives a misery, accepted potentially dangerous exposure to X-rays, and waved away our Fourth Amendment rights, all in the name of &ndash; what?"<br /> &mdash;<em>The Travel Insider</em>, Weekly Roundup, October 25, 2013</p>
<p>"When the <em>lingua franca</em> of Europe was Latin, commentators remarked on just how complex Europe was to govern. Nothing has changed. However, today the <em>lingua franca</em> is [European] Commission bureaucratese. Of all the complex bits of European governance, one of the most complex and difficult to explain has to be the prohibition on State Aid. No other country or region has rules that prohibit State Aid. Indeed, most countries look at ways to hand out largesse. Every trade association has entire departments devoted to begging for State Aid or distributing it once it arrives. Europe, as we so often see, is different. Europe's rules prohibit handing out State Aid if it distorts any market. Given that the point of State Aid is to distort markets, that just about covers the field."<br /> &mdash;Andrew Charlton, "State Aid and Airports: Pork Barrel Meets Sausage Machine," <em>Aviation Intelligence Reporter</em>, October 2013</p>
<p><em><span style="font-style:normal;">"At least someone is having a good time. In his regular column in the October 2013 edition of </span><span>Management Today</span></em><em><span style="font-style: normal;">, Sir Howard Davies said, 'It [the summer] wasn't exactly a quiet time. I ploughed through 58 submissions to the Airports Commission, each with a different approach to capacity planning from islands on stilts in the Thames to spaceports and runways equipped with maglev take-off vehicles launching jumbos silently into the west London skies. I haven't had so much futuristic fun since I gave up reading </span><span>The Eagle</span></em><em><span style="font-style: normal;">.'"</span></em><br /> <span style="font-family:">&mdash;David Bentley, "UK Airport Capacity &ndash; Unravelling the Conundrum," published by David Bentley</span></p>
<p>"We have an airport governance and ownership structure that was invented in 1928, when Calvin Coolidge was president. We have a Nixon-era structure for airport finance. The policy framework for airlines is more recent; it dates from Jimmy Carter's time. And our <span class="GramE">never ending</span> search for full modernization of air traffic control still lurches almost from year to year. Policies have been carved in ancient, and out of date, stone, as have mindsets. Meanwhile, our global competitors, many of which were afterthoughts or didn't even exist when our policies and mindsets were formed, are leaving us in the dust."<br /> &mdash;Greg Principato, speech at DePaul University, Oct. 21, 2013</p>
<p><a href="#top">&raquo; return to top</a></p>1013613@http://www.reason.orgTue, 12 Nov 2013 21:37:00 ESTbob.poole@reason.org (Robert Poole)How Government Wastes Our Time in Travelhttp://www.reason.org/blog/show/how-government-wastes-our-time-trav
<p>Time is the ultimate scarce resource. Unfortunately, Americans waste a huge amount of time every year as they commute to and from work, and also when they travel by air. <br /> <br />The Texas A&amp;M Transportation Institute estimates the direct cost of urban traffic congestion at $121 billion per year (and that is just an estimate of people&rsquo;s time and excess fuel burned in stop-and-go congestion). The full economic costs of traffic congestion are about twice that much, including lower urban area productivity and higher freight costs. <br /> <br />Air travel delays, both at airports and in the sky, are in the vicinity of $29 billion per year, according to an academic study funded by the Federal Aviation Administration. Air travelers also spend an estimated 138 million hours a year waiting in Transportation Security Administration airport security screening lines. <br /> <br />A common factor in these cases is that the infrastructure involved is owned and operated by government agencies. For various reasons, they don&rsquo;t seem to take seriously the enormous burden that their delays and congestion impose on us as individual travelers (and on the U.S. economy). Relief from congestion and delays can only come about via changes in government policy, such as implementing market pricing and in some cases privatizing the transportation infrastructure. The good news is that steps in these directions are occurring. But the bad news is that so far they have only scratched the surface. <br /> <br />For urban congestion, the big change in recent years has been the introduction of express toll lanes in 14 of the 20 most-congested metro areas. Most of the initial projects have involved converting carpool lanes to toll lanes, with variable pricing keeping demand (vehicles per lane per hour) within the capacity of the priced lane, so that you can drive at the speed limit even during rush hours. <br /> <br />The next step, under way in Atlanta, Dallas/Ft. Worth, Houston, Miami, San Diego, San Francisco, and Seattle, is to create entire networks of express toll lanes. A network lets people make faster and more-reliable trips from anywhere to anywhere in the metro area&mdash;and that also makes possible region-wide express bus service. <br /> <br />Building such networks involves adding new lanes and connectors, which will cost tens of billions of dollars, and require financing via toll revenue bonds. That has opened the door to investors and global toll road companies, under long-term public-private partnerships. Global infrastructure funds are ready and willing to invest in such projects, but we are at least a decade away from the first urban express toll networks being in place and operational. <br /> <br />Relief is also in prospect for many air travelers, now that the TSA has finally (after 10 years) accepted the principle of &lsquo;trusted travelers.&rsquo; As put forth shortly after the 9/11 terrorist attacks, but rejected by the first several TSA administrators, the idea is that people who are pre-vetted (e.g., passing a background check) are very low-risk and should not have to go through all the post-9/11 security hassles. Last year the current TSA Administrator endorsed the concept and the result was PreCheck, implemented at 40 airports so far. It was initially offered only to high-end members of airline frequent flyer programs, on whom extensive travel histories exist. Members use special checkpoint lanes with basically pre-9/11 screening. TSA is now expanding the program to another 40 airports and will sell memberships to other air travelers who agree to a background check. TSA&rsquo;s parent agency had previously pioneered a trusted traveler program called Global Entry, which lets air travelers returning from overseas bypass long lines at Immigration if they have passed a background check and obtained a biometric ID card. <br /> <br />But there has been little progress so far in reducing delays to airliners. The greatest delays occur at a handful of airports, especially the three that serve the New York metro area. For various reasons, it has been politically impossible to add runway capacity at Kennedy, LaGuardia, and Newark airports (unlike Chicago, where a major expansion of runways has greatly reduced congestion). Because air travel is so interconnected, long delays at the New York airports ripple through the system, delaying a great many other flights. <br /> <br />When runways cannot be expanded, the best way to reduce congestion is market pricing for runway access. With much higher prices during congested peak periods, airlines will have incentives to save money by some combination of (a) shifting some flights to off-peak times, and (b) using larger planes during peak periods. Incumbent airlines at congested airports have so far fought hard against runway pricing, but former Transportation Secretary Mary Peters changed federal policy to allow airports to do this, so it may be a matter of time until some congested airport bites the bullet and does so. <br /> <br />Air travel delays could also be reduced by modernizing the air traffic control system. Our system still uses largely 1960s concepts and technology, which is so inaccurate that it must provide huge buffer zones around each plane in flight, for safety reasons. GPS-based technology and other enhancements will make it possible to reduce those buffer zones, thereby adding capacity to the airways. Such technology can also be used to increase the hourly capacity of many airport runways. But the Federal Aviation Administration is risk-averse and status-quo oriented. A serious revamp of the air traffic control system will probably require &ldquo;corporatizing&rdquo; the system, turning it into a user-supported utility, as has been done in Australia, New Zealand, Canada, Germany, and the U.K. with excellent results. <br /> <br />The bottom line is that major transportation infrastructure owned and operated by governments has given short shrift to the huge burdens of wasted time imposed on all of us. The best hope for relief is to convert that infrastructure into customer-friendly utilities that use market pricing to balance demand with capacity.</p>1013593@http://www.reason.orgWed, 30 Oct 2013 07:01:00 EDTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #94http://www.reason.org/news/show/airport-policy-and-security-news-94
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">Airport privatization after Midway</a></li>
<li><a href="#b">Cockpit secondary barriers?</a></li>
<li><a href="#c">Airline up-gauging and congestion pricing</a></li>
<li><a href="#d">Inspector General on TSA's behavior detection</a></li>
<li><a href="#e">PreCheck expanding to more airports</a></li>
<li><a href="#f">Another WTC lawsuit thrown out</a></li>
<li><a href="#g">News Notes</a></li>
<li><a href="#h">Quotable Quotes</a></li>
</ul>
<p><span><strong><a name="a"></a>After Midway, Whither US Airport Privatization?</strong></span></p>
<p><span>I was as surprised as nearly everyone else by Chicago Mayor Rahm Emanuel's decision early last month to halt the privatization process for Midway Airport. The decision came after one of the two finalists appeared to be pulling out, leaving only the Macquarie/Ferrovial team in the running. With support for privatization from the City Council uncertain, Emanuel decided to pull the plug, rather than negotiating with the only bidder.</span></p>
<p><span>That may have been the political path of least resistance, but as I told a <em>Bond Buyer</em> reporter, the city might still have been able to negotiate a deal that met its key requirements, since serious negotiations had not yet begun. Clearly, the city's desire for both a large up-front payment and significant ongoing revenue sharing reduced Midway's attractiveness to investors, but you never know how good a deal you can get until you negotiate.</span></p>
<p><span>In the aftermath of the announcement, there were various hints that Chicago might try again, which would require trying to hang onto its slot. My view, expressed in a blog post at the time, was that five years of sitting on the only "large hub" slot in the federal Airport Privatization Pilot Program was enough. By occupying that slot, Chicago was precluding serious consideration of privatization by any of the other 28 airports defined by FAA as large hubs (based on annual passenger counts). But those doubts were put to rest by the recent disclosure of Mayor Emanuel's September 9<sup>th</sup> letter to the FAA formally withdrawing its preliminary application to the Pilot Program. So the large-hub slot is, in fact, open.</span></p>
<p><span>In previous years, under various political leaders or candidates for office, airport privatization has been proposed or debated for a number of these large hubs, including Atlanta, BWI, Boston, Dulles and DCA, JFK and LGA, LAX, Minneapolis/St. Paul, and Philadelphia. I am not aware of any current discussions about privatizing these or other large hubs, but that possibility is now open. Given the enormous unfunded pension liabilities of many U.S. cities, I would not be surprised if one or more of those owning a large hub airport began to calculate how much they might generate to shore up their ailing pension funds via a long-term lease of their airport.</span></p>
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<p><strong><a name="b"></a>Are Cockpit Secondary Barriers Cost-Effective?</strong></p>
<p>Ellen Saracini is the widow of United pilot Victor Saracini, who died when hijackers took over the cockpit of UA 175 and crashed it into the south tower of the World Trade Center on Sept. 11, 2001. Today she is a principal advocate for federal legislation to mandate the installation of secondary barriers on all commercial planes with hardened cockpit doors, to better secure the flight deck when the cockpit door is opened in flight (e.g., for meals or lavatory visits). A bill to mandate this, with bipartisan sponsorship, the Saracini Aviation Safety Act of 2013, is pending in the House and a companion measure was introduced in the Senate last month. Pilots generally support the measure, while airlines are uniformly opposed.</p>
<p>Meaning no disrespect to Ms. Saracini, the way to decide whether secondary barriers make sense is not via emotional appeals about 9/11 but via serious cost-benefit analysis. And fortunately, excellent analysis of this question has been done by a pair of researchers I have cited previously, Mark Stewart (University of Newcastle, Australia) and John Mueller (Ohio State University). Stewart and Mueller have devised several valid methodologies for estimating the cost-effectiveness of various aviation security measures, and their book on the subject is <em>Terror, Security, and Money: Balancing the Risks, Benefits, and Costs of Homeland Security</em> (Oxford University Press 2011).</p>
<p>One such method is to estimate the annual cost of a security measure or set of measures, estimate the benefits of a terrorism incident prevented by the measure(s), and then do a break-even analysis to calculate the minimum probability of a successful attack required for the benefits to exceed the cost. In a paper published this year in the journal <em>Risk Analysis</em> (Vol. 33, No. 5), they apply this method to cockpit protection, with the possible added measures (in addition to the existing hardened doors) being (1) Federal Air Marshals (FAMs) (2) the armed-pilots program (Federal Flight Deck Officers), and (3) installed physical secondary barriers (IPSBs). All three have the same aim&mdash;to supplement hardened doors to prevent terrorists gaining control of the cockpit, and they could be used separately or in any combination.</p>
<p>Analyzing these measures separately, and using plausible estimates of the cost of each and of the benefits (costs avoided) of a single-plane 9/11-type attack, they find the following results:</p>
<table border="0" cellpadding="3" cellspacing="2" width="100%">
<tbody>
<tr>
<td><span style="text-decoration: underline;">Measure</span></td>
<td><span style="text-decoration: underline;">Cost-Effective if Terror Attack Occurs</span></td>
</tr>
<tr>
<td>FAMs</td>
<td>More than two per year&nbsp;</td>
</tr>
<tr>
<td>FFDOs</td>
<td>One every 50 years</td>
</tr>
<tr>
<td>IPSBs</td>
<td>One every 200 years</td>
</tr>
</tbody>
</table>
<p>In other words, secondary barriers are the low-hanging fruit to supplement the effectiveness of the existing hardened cockpit doors. Armed pilots are not quite as good, but since they cost very little, they are also a good kind of insurance policy. The real loser is FAMs. Why is this? Stewart and Mueller use FY 2011 budget numbers, under which the FAM program cost $950 million per year. Thanks to recent budget cuts, it will likely be $821 million in 2014, but that sum buys very little protection, since FAMs are present on only about 5% of flights. Since they travel in pairs and require first-class seats, they cost airlines about $250 million a year in lost revenue. Those factors are all taken into account in the benefit-cost calculations.</p>
<p>By contrast, the FFDO program costs TSA only about $25 million a year, since the pilots volunteer for the required training. And FFDOs are present on about five times as many flights as FAMs. As for secondary barriers, the authors use a worst-case estimate of $30,000 per plane (when some estimates are less than $10,000) and amortize this over an average 20-year life of the plane.</p>
<p>(Note: I have summarized and simplified the extensive calculations and sensitivity analysis used by the authors; interested readers should consult their <em>Risk Analysis</em> article for details: "Terrorism Risks and Cost-Benefit Analysis of Aviation Security.")</p>
<p>My recommendation to the airlines is that instead of looking bad by opposing the Saracini legislation, they should support a friendly amendment: Eliminate the poorly justified Federal Air Marshal program (saving $820 million per year) in exchange for a one-time expenditure of $60 million to equip the airline fleet with secondary barriers ($10,000 times 6,000 aircraft). That would be more effective and a lot less costly than the status quo.</p>
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<p><strong><a name="c"></a>Airline Up-gauging&mdash;and Congestion Pricing</strong></p>
<p>I experienced a real <em>d&eacute;j&agrave; vu</em> moment on August 12<sup>th</sup>, when I saw a front-page headline in <em>Aviation Daily</em> reading, "Up-gauging Emerging as Key Capacity Strategy." The article recounted how airlines like US Air are switching orders from smaller Airbus A319s to larger A320s and A321s, and how Delta is replacing 50-seat regional jets with new 76-seaters, and in turn, replacing 76-seaters on other routes with larger Boeing 717s. I had to laugh, thinking back to my arguments with airline officials on up-gauging back in autumn 2007.</p>
<p>That was when the Mary Peters DOT was trying to address the huge congestion problems at the three main New York airports with market-based measures---either slot auctions or runway congestion pricing. The DOT general counsel invited me to a meeting of the Aviation Rulemaking Committee they had set up to get airport and airline input on these measures. Sitting in that meeting, I was blown away by the vehement airline arguments in opposition, which did not appear to be well-supported, either by good economics or by evidence.</p>
<p>Reason Foundation was already working on a major policy study on the potential of runway congestion pricing for the three airports, which I disclosed in that meeting. That soon led to a nearly two-hour conference call at which various airline people sought to persuade me that neither slot auctions nor pricing would work, or that they would create unacceptable side effects. I took note of each of their concerns, and made sure that our study addressed each of them (<a href="http://reason.org/news/show/congestion-pricing-for-the-new">http://reason.org/news/show/congestion-pricing-for-the-new</a>).</p>
<p>One key impact of runway congestion pricing, according to extensive research, would be that airlines facing increased charges to land and take off during high-demand periods would up-gauge a number of flights&mdash;e.g., substituting one 717 for two regional jets, providing the same or increased passenger capacity at the expense of the previous level of flight frequency via the smaller planes. The airline people insisted this would not happen, and that they needed all the existing frequencies to satisfy customer demand.</p>
<p>But in the course of our research, I came across the results of an FAA-sponsored simulation exercise, done by several universities in FAA's NEXTOR consortium. In 2004-05, they carried out several "strategic games" to test various government policies aimed at reducing congestion at LaGuardia Airport. Six teams took part in the games&mdash;four representing major airlines, one from the federal government, and one from the Port Authority. The airline teams each worked through scenarios of adjusting their flight schedules in response to various administrative and pricing policies. George Donohue and Karla Hoffman of George Mason University summarized these exercises in a Reason Policy Brief (<a href="http://reason.org/news/show/evidence-that-airport-pricing">http://reason.org/news/show/evidence-that-airport-pricing</a>). To cut to the chase, congestion pricing produced the best results in terms of reducing LGA congestion. And the key to that result was . . . up-gauging. Faced with peak runway charges (for both take-offs and landings) in the $800-$1,200 range, the airline teams crunched their numbers and decided that somewhat reduced frequencies and a larger average size plane made the most sense.</p>
<p>Eventually, the Peters DOT gave up trying to introduce a modest slot-auction plan at the New York airports. But they did put through a change in DOT's airport rates and charges policy to permit airports to use congestion as a factor in runway charges. The airlines challenged it in court and lost. So that policy remains in force, waiting for any airport management with a chronic congestion problem to try it out.</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong><a name="d"></a>Inspector General Lets TSA's SPOT Program Off the Hook</strong></p>
<p>After reading and writing about (in Issue No. 59, July/August 2010) the GAO's withering critique of&nbsp; TSA's SPOT (Screening of Passengers by Observation Techniques) program, I was eager to read what the DHS Inspector General's Office had to say about the program three years later. Alas, while the IG report (OIG-13-91, May 2013) has a lot of critical things to say, its recommendations are trivial, and they pose no threat to the continued existence and growth of a program that has failed to demonstrate any aviation security value.</p>
<p>Let's first review a few numbers from the new IG report. SPOT began in FY2007 with Behavior Detection Officers (BDOs) assigned to 42 generally larger airports and a modest budget of $20 million. It has grown significantly since then, despite zero evidence of effectiveness, to 176 airports and a FY2012 budget of $205 million. The hard-hitting 2010 GAO report pointed out that there is no peer-reviewed science behind the program's basic concept: that minimally trained former TSA screeners can do very brief interviews with passengers awaiting screening and identify various behavior cues that identify them as risks to aviation security. And that is still the case.</p>
<p>The OIG report <em>does</em> say that "TSA cannot assess the effectiveness or evaluate the progress of the SPOT program." It notes that the data TSA does collect are "incomplete and inaccurate." It also says that "TSA has not developed performance measures for the SPOT program," and notes that even though its purpose is to "identify high-risk individuals who may pose a threat to transportation security," the only data it collects "do not provide a measure of program effectiveness." That's because the only data TSA compiles are on those few cases in which the BDOs "refer" someone to a law enforcement officer. In FY2012, those referrals resulted in a grand total of 176 arrests (out of an estimated 657 million passengers going through TSA screening). And apparently none of those arrests were for anything related to terrorism; the OIG audit says they were mostly for outstanding warrants, drug possession, or being an illegal alien.</p>
<p>But the OIG report never once says TSA should develop an outcome measure based on spotting potential terrorists. It focuses attention on errors and deficiencies in the data on referrals&mdash;as if that were a useful measure of the program's effectiveness. So its recommendations are all procedural: TSA should implement a strategic plan for the program, including "a system to measure performance"; beef up the referrals database so it is more accurate and complete; provide recurrent training for BDOs (for their non-evidence-based method of spotting terrorists); etc. And of course, TSA agreed with all the recommendations and says it was already implementing most of them.</p>
<p>This is pretty pathetic, and is no match for the previous GAO report (GAO-10-763), which I advise concerned members of Congress to re-read. SPOT is just as questionable now as it was in 2007&mdash;only it's spending ten times as much money.</p>
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<p><strong><a name="e"></a>PreCheck Expanding to 60 More Airports</strong></p>
<p>The good news for frequent flyers is that TSA's almost-trusted-traveler program is expanding, in two meaningful ways. First, the agency is moving to implement the program at 60 more airports, bringing the total to 100. And second, it plans to add additional PreCheck lanes to at least some of the original 40 airports as membership in the program increases. (Note: on my last trip from MIA, in late September, there was a long line to get into the sole PreCheck lane in the north terminal, the first time I or my fellow travelers had ever experienced this.)</p>
<p>In addition, according to a Sept. 4<sup>th</sup> bulletin from TSA, "JetBlue and Southwest are expected to begin participating [in PreCheck] whenever operationally ready." That suggests that TSA is still clinging to the model that PreCheck is an airline-specific program rather than the open-to-all-who-qualify model that it announced earlier this year. But once TSA starts enrolling paying members, it will presumably have to allow them to use PreCheck lanes regardless of which airline they are flying.</p>
<p>The bad news is another TSA announcement, reported by Bloomberg News on Sept. 10<sup>th</sup>. In order to achieve its goal of having 25% of all daily passengers using PreCheck by the end of next year, it will choose passengers not enrolled in PreCheck on a case-by-case basis to go through PreCheck lanes. According to the article, "Passengers will be chosen after a background check, before they get to the airport, according to an article to be published in the <em>Federal Register</em>." Say what? It turns out this "background check" is nothing more than the Secure Flight check carried out on <em>every single passenger</em>, based on full name, date of birth, and gender.</p>
<p>That is a farce. By that standard, nearly everyone going through security would be eligible to use PreCheck lanes, except for those on TSA watch lists and no-fly lists. This "enhancement" of PreCheck should be recalled as inherently defective.</p>
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<p><strong><a name="f"></a>Another World Trade Center Suit Thrown Out&mdash;But Another Is Still Pending</strong></p>
<p>The false premise that airlines were at fault for the hijackers being able to board the flights that brought down the World Trade Center is still making its way through the courts, as plaintiffs and their lawyers seek to force airline insurers to pay huge claims for lives and properties.</p>
<p>In July, federal judge Alvin Hellerstein threw out a suit against American and United based on this premise filed by World Trade Center developer Larry Silverstein. The same judge is scheduled to hear a similar case being brought by Cantor Fitzgerald, a financial firm that lost 658 employees in the attacks. It has sued American Airlines, alleging negligence and seeking compensation from AA's insurers for lost business and destruction of its offices.</p>
<p>Unfortunately, Judge Hellerstein's grounds for rejecting Silverstein's suit was that the latter had already collected $5 billion from his own insurers for his WTC losses. The judge cited state law barring "windfalls and double recovery on the same loss."</p>
<p>That may be valid legal reasoning, but it ignores the plain facts about the terrorists' success in boarding the planes. The screening companies hired by the airlines followed then-current FAA rules, which did not ban the only known weapons the hijackers brought on board&mdash;box cutters. And they and the airlines also used the CAPPS pre-screening system in the dumbed-down manner required by US DOT at that time to avoid singling out any of the hijackers for additional screening.</p>
<p>So the blame for a very flawed aviation security system on 9/11 lies with the US government, not with the airlines or their screening companies. These suits should be dismissed with prejudice on those grounds.</p>
<p><a href="#top">&raquo; return to top</a></p>
<p><strong><a name="g"></a>News Notes</strong></p>
<p><span style="text-decoration: underline;">Gary Airport Shortlists Two Privatization Bidders</span>. From the 10 proposals submitted in August, the Gary/Chicago Airport selected two finalists: GCIA Group and Aviation Facilities Company. Neither offered an up-front payment, nor did either offer to pay the $800,000 costs the airport has incurred in getting to this point. The RFP did require each to commit to investing or attracting $100 million into the currently money-losing airport.</p>
<p><span style="text-decoration: underline;">Brazil Expands Airport Privatization Program</span>. Two more major airports&mdash;Galeao in Rio de Janeiro and Tancredo Neves in Minas Gerais&mdash;will be offered during the fourth quarter of 2013. The concession period for the former will be 25 years and for the latter, 30 years. State-owned airport company Infraero will hold a 49% share in each concession. Separately, Sao Paulo state announced that it will offer 30-year concessions for five of its airports.</p>
<p><span style="text-decoration: underline;">New Club Opens at Atlanta Airport</span>. For those who are not members of Delta Airlines' Sky Club but have time to kill at ATL, the new "Club at ATL" offers food, drinks, workspace, and showers for $35 per visit. It's the latest location for non-airline clubs offered by Airport Lounge Development of Plano, TX, following earlier clubs at DFW, Las Vegas, Raleigh, and San Jose. And the company says other locations are in prospect in the near future.</p>
<p><span style="text-decoration: underline;">India's Privatization Program Expands</span>. The Airports Authority of India announced last month that six more airports will be privatized. RFQs for the first two&mdash;Chennai and Lucknow&mdash;were issued Sept. 2, to be followed soon by solicitations for Kolkata, Guwahati, Jaipur, and Ahmedabad. The concessions will be for 30 years, and AAI will garner 49% of airport revenues, consistent with the existing concessions at New Delhi and Mumbai.</p>
<p><span style="text-decoration: underline;">London City Airport Proposes Major Expansion</span>. On Sept. 19, privately owned London City Airport applied for planning permission to spend $320 million to double its passenger capacity to 6 million per year. The investment would expand the terminal, add a taxiway, and add new parking stands for aircraft, facilitating an increase in annual flights from the current 70,000 to 120,000. The airport is owned by Global Infrastructure Partners, a joint venture of Credit Suisse and General Electric.</p>
<p><span style="text-decoration: underline;">FAA Finalizes Flight Privacy Policy</span>. Complying with a mandate from Congress, the FAA last month finalized a policy under which aircraft operators can block the release of flight tracking data to third parties. Near-real-time flight data, by tail number, are generally available via FAA's Aircraft Situation Display. Prior to Congress's action, the U.S. DOT required those submitting a blocking request to provide a security justification.</p>
<p><span style="text-decoration: underline;">Belgium Privatizes Two Airports</span>. The Flemish government has awarded 25-year concessions to French infrastructure company Egis to upgrade and operate the Antwerp and Ostend-Bruges airports. The former primarily serves business traffic while the latter serves both tourist and freight traffic.</p>
<p><span style="text-decoration: underline;">Global Entry Correction</span>. In last issue's article on expanded Trusted Traveler programs, I mistakenly wrote that Global Entry members must insert their card in the kiosk. A reader pointed out that only one's passport is inserted in the kiosk, as I verified last month when using Global Entry for my clearance to return to the United States from Vancouver. I was dismayed to find there were only two such kiosks at YVR, requiring a number of us to stand in line waiting to use one. <span style="text-decoration: underline;"></span></p>
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<p><strong><a name="h"></a>Quotable Quotes</strong></p>
<p>"There is . . . an air of unreality about the lawsuit that Justice filed Aug. 13 to block the [AA-US] merger. Throughout there is an undertone that, after years of bouncing between profitability and loss, all is now right with the U.S. airline industry. . . . The truth is that for much of the previous decade, the industry was so beset by overcapacity that it could not price its product rationally. Even including those baggage and change fees, the average inflation-adjusted, round-trip domestic ticket price has declined 36% since the industry was deregulated in 1978. Meanwhile, the price of jet fuel has soared, up 30% since 2007 and 165% since 2000. The upshot: on average, a U.S. carrier must fill 81% of its seats just to break even on a flight, up from 78% in 2007 and less than 70% in 2000."<br /> &mdash;Editorial, "Airline M&amp;A Sense and Nonsense," <em>Aviation Week</em>, Aug. 26, 2013</p>
<p>"It would seem that the entire DoJ case against this merger swings on the passengers' entitlement to cheap fares. This merger runs the risk of producing the outcome of a profitable airline. The DoJ seems to think it is anathema. Do passengers have an entitlement to cheap fares? No, they have an entitlement to safe air transport. That obligation falls on the shoulders of the regulators. So does the airlines' entitlement to a fairly umpired marketplace. Other American carriers have been allowed to consolidate. Why not AA and US Air?&nbsp; It is not the job of the DoJ or any other anti-trust agency to assume that passengers are entitled to cheap fares. It is their job to ensure that there is no market dominance other than that earned by hard work and a better product, and to ensure no collusive behavior. This DoJ application is mission creep."<br /> &mdash;Andrew Charlton, "The DoJ, AA and USAir: So Much for Competition," <em>Aviation Intelligence Reporter</em>, September 2013</p>
<p><a href="#top">&raquo; return to top</a></p>1013564@http://www.reason.orgThu, 03 Oct 2013 18:02:00 EDTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #93http://www.reason.org/news/show/airport-policy-and-security-news-93
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">Antitrust case threatens major airports</a></li>
<li><a href="#b">Expansion of trusted traveler under way</a></li>
<li><a href="#c">Positive outlook for US airport privatization</a></li>
<li><a href="#d">Security risk of foreign-owned planes</a></li>
<li><a href="#e">Tarmac delay rule's impacts</a></li>
<li><a href="#f">Airport privatization news from Spain</a></li>
<li><a href="#g">News Notes</a></li>
<li><a href="#h">Quotable Quotes</a></li>
</ul>
<p><span><strong><a name="a"></a>Antitrust Case Threatens Major Airports</strong></span></p>
<p><span>Like nearly everyone else knowledgeable about aviation, I was astounded by the Justice Department's attempt to forbid the merger of American and US Airways. And after reading all 56 pages of the DOJ brief, I was appalled at its hubris and lack of understanding of the dynamics of commercial aviation. And I'm still trying to figure out why the Attorneys General of six states signed onto this disgraceful exercise.</span></p>
<p><span>Let me begin at the macro level. What has been unfolding for the 35 years since the Airline Deregulation Act of 1978 is a painful discovery process as numerous airline companies have tried to develop viable business models (unconstrained by government route selection and price controls). Many new companies entered and failed, and the least nimble of what we now call "legacy" carriers went under (<span class="SpellE">Braniff</span>, Eastern, National, Pan Am, TWA, etc.). In the past decade the surviving legacies all went through bankruptcy proceedings and joined global alliances, but still had difficulty competing with the likes of Southwest, JetBlue, Spirit, Allegiant, and others with radically different business models.</span></p>
<p><span>Clearly this says that the "legacy" sector should be shrinking, and the recent mergers of the survivors (Delta with Northwest and United with Continental, neither opposed by DOJ) seemed to be stopping the bleeding, thanks to greater capacity discipline and more careful pricing. The last best hope for American and US Airways is to do likewise&mdash;despite DOJ. </span></p>
<p><span>DOJ's concerns about diminished competition are focused narrowly on the legacy sector, as if Southwest and the others didn't exist and weren't growing and profitable. Southwest, thanks in part to its acquisition of <span class="SpellE">Airtran</span> (also unchallenged by DOJ) and its moves into major markets such as Atlanta, Denver, Chicago, and New York, has become, in reality, the fourth network carrier (after Delta, United, and the post-merger American). Southwest's share of connecting (as opposed to point-to-point) traffic is now up to 28% and its average route is 21% longer than 10 years ago. And in the several weeks since the DOJ filed its antitrust case, both Allegiant and Spirit have announced many new routes. Allegiant will now serve 99 US destinations (most of them the kinds of underserved airports that the legacies have largely abandoned), while Spirit has penetrated such major hubs as DFW, DEN, MSP, and ORD. (If you want to read a well-informed critique of the specifics of DOJ's case, check out Cranky Flier's two-part assessment, August 14-15&mdash;crankyflier.com.)</span></p>
<p><span>As for the impact on airports, why the conservative Republican AGs of Florida and Texas would seek to torpedo American's best hope for long-term survival and growth is beyond me. <em>Transportation Weekly</em> suggests populist concerns about possibly reduced flights between Washington National (DCA) and smaller cities in states like these if the merger goes through. But if the merger is killed and American must struggle against megacarriers Delta and United, then it is major American hubs like DFW and MIA that are at risk of cutbacks. The former American stand-alone plan, based on large-scale expansion, was rejected by all of the airlines' creditors (as well as its employees) as highly likely to <span class="GramE">fail,</span> yet DOJ's brief presents it as a viable alternative.</span></p>
<p><span>I am not qualified to present a legal opinion on the strength or weakness of DOJ's case, but my aviation background says that this case deserves to be rejected by the courts. It is based on a static model of commercial aviation, which DOJ thinks it can restructure with positive results for air travelers. Yet DOJ's way of looking at aviation would never have predicted the rise of Allegiant and Spirit, with their radically different ultra-LCC business models. If there is any role for antitrust in a deregulated airline industry, it is to keep entry open to entrepreneurs and venture capitalists with potentially better business models&mdash;not to try to micromanage the shape of the industry.</span></p>
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<p><span><strong><a name="b"></a>Expansion of Trusted Traveler Under Way</strong></span></p>
<p><span>Just two weeks after the last issue of this newsletter, lamenting TSA's slow progress with expanding <span class="SpellE">PreCheck</span>, the agency announced a major expansion on July 19<sup>th</sup>. In what Administrator John <span class="SpellE">Pistole</span> is informally calling "Global Entry Lite," the new effort is open to any U.S. citizen with an $85 application fee willing to provide enough information online, and fingerprints in person, to permit the agency to carry out a Security Threat Assessment (background check) similar to what is used for airport employees requiring access to secure locations. For those who pass the background check, eligibility to use <span class="SpellE">PreCheck</span> lanes will be good for five years, and can be used at any <span class="SpellE">PreCheck</span> lanes at airports (whose number is to be increased). </span></p>
<p><span>TSA has announced ambitious goals for expanded <span class="SpellE">PreCheck</span>, including enrolling passengers responsible for 25% of daily trips by the end of this year and 50% of daily trips by the end of next year. That is not the same as 25% or 50% of all airline passengers, because a large fraction of those flying on any given day are frequent flyers, most of whom (like me) make dozens of trips per year and some of <span class="GramE">whom</span> make hundreds. From an airport's standpoint, what will really improve the flow at checkpoints is the fraction of daily trips diverted to fast lanes, and that is what TSA is aiming to accomplish.</span></p>
<p><span>To facilitate the process, the agency will be opening enrollment centers at airports, first at Washington Dulles and Indianapolis, and at an unspecified number of other airports later on. Christopher Bidwell, VP for security at Airports Council International-North America told <em>New York Times</em> columnist Joe Sharkey that expanded <span class="SpellE">PreCheck</span> is "the best thing since sliced bread" for airports, though he expressed some concern about space requirements at smaller airports.</span></p>
<p><span>While I applaud this expansion of the trusted traveler concept, I still have two concerns. First, TSA says members will be able to use the <span class="SpellE">PreCheck</span> lanes "when flying on any of the participating carriers." That means despite opening the program to non-high-level members of airline frequent flyer programs, it is still airline-specific. Yet the whole point of the expanded program is to enroll (and vet) individuals, not airline FF members. Once an individual has passed the background check, he or she should be able to use <span class="SpellE">PreCheck</span> lanes no matter what airline is needed for a particular trip.</span></p>
<p><span>But this flaw may be related to the other flaw in the expanded program: the absence of a biometric ID card. With Global Entry, when you show up at the kiosk to bypass the long lines at Immigration, you insert your biometric card into the machine and then provide a fingerprint that has to match what's encoded in your card. That verifies that you are the person who passed the background check, rather than someone who either obtained the Global Entry card of someone else or purchased a counterfeit one. But in the absence of a biometric card, the new <span class="SpellE">PreCheck</span> members will rely on the boarding <span class="GramE">pass which</span> their airline (if and only if it's a <span class="SpellE">PreCheck</span> participant) will have imprinted with the <span class="SpellE">PreCheck</span> symbol. So if your routing requires you to fly a non-participant such as Southwest, you apparently will be out of luck at the <span class="SpellE">PreCheck</span> lane (unless you present a Global Entry card).</span></p>
<p><span>I have also just learned that TSA's effort to enlist the private sector to vet additional travelers as trusted, launched back in January, is close to producing results. Three of the companies that submitted concept papers in response to TSA's Request for Information have been selected to recruit and vet <span class="SpellE">PreCheck</span> applicants, each using its own method. Reportedly, they are in the final stages of having their models reviewed by TSA, with the intent of starting operations sometime this fall.</span></p>
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<p><span><strong><a name="c"></a>U.S. Airport Privatization Outlook Positive at Recent Conference</strong></span></p>
<p><span>In June I attended and spoke at the 3<sup>rd</sup> annual AAAE/<span class="SpellE">LeighFisher</span> Airport Public-Private Partnership Conference. While its scope was global for context, the main focus was on assessing the prospects for airport privatization and PPPs in the United States.</span></p>
<p><span>And on that score, the message from a number of speakers was relatively bullish. Despite a lot of discussion about how different U.S. airport funding and governance is compared with most of the rest of the world where airport privatization has been going on since 1987, the financial speakers in particular saw the United States as a largely untapped market for airport privatization. Tim Reynolds of <span class="SpellE">Highstar</span> Capital (fresh from the successful lease of San Juan International) told attendees that more and more local officials are asking their airport directors about privatization (and in a conversation during a break, one such financier told me they have had serious queries from six mid-size airports since the San Juan deal was finalized early this year). William Sutherland of ING noted the "enormous" amount of private capital looking for good infrastructure investment opportunities, including in U.S. airports. Tim Bath of RBC Capital Markets noted a "massive appetite" for financing U.S. airports, versus those of other countries. And from the operations side, <span class="SpellE">Amit</span> <span class="SpellE">Rikhy</span> of ADC &amp; HAS (the only U.S. airport privatizer with global scope) said that as they see it, the United States and Japan are the next major frontiers for airport privatization.</span></p>
<p><span>One question getting a lot of attention was how to value U.S. airports, given the differences from overseas airports. Neal <span class="SpellE">Attermann</span> of Citi said that U.S. airports can be valued on the same basis as overseas airports: either discounted expected future cash flows or as a multiple of net revenues. His slides presented considerable data on the past decade's worth of overseas transactions, finding that the market valuation of privatized (and publicly traded) airports as a multiple of EBITDA (earnings before interest, taxation, depreciation and amortization) averaged 7.1 in Europe, 7.8 in Asia, and 8.7 in Latin America. On the other hand, a more detailed look at the value of stakes acquired in airport companies in Europe during the last three years ranged widely, with a median of 14.0 times EBITDA. We will likely get a better handle on potential U.S. multiples when the Chicago Midway deal reaches financial close this fall or winter.</span></p>
<p><span>On the "sell" side, what is likely to motivate U.S. cities and counties to consider leasing their airports under the FAA pilot program? Changes in airport financing, stimulated by the fiscal crunch affecting the federal budget and state and local government budgets, are a likely driver. As former highway official Jack Basso told attendees, "Innovation comes about when the money runs out." Several participants suggested that federal Airport Improvement Program grants could be scaled back, and that even the tax-exempt status of municipal bonds may be at risk in a future comprehensive federal tax reform. David Sigman of LCOR likened airports' long-term dependence on tax-exempt bonds and AIP grants to heroin dependence.</span></p>
<p><span>Which U.S. airports might be next, after San Juan and Midway? My guess is that two categories may be favored. One category is airports that have lost market share and need to be revitalized with a new business model&mdash;such as Ontario (CA) and St. Louis Lambert. The other is <span class="GramE">fast-growing airports</span> that may be tempted to over-invest and put local taxpayers at risk (as happened with Pittsburgh and St. Louis). One such airport is Austin, whose mayor has spoken publicly about privatization in connection with planning for a large-scale expansion. In such cases the ability to shift major risks to investors could make a long-term PPP lease attractive.</span></p>
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<p><span><strong><a name="d"></a>Security Risk Re Foreign-Owned Private Planes, Inspector General Says</strong></span></p>
<p><span>More than a year ago, a participant in an online aviation forum posted an item alleging that numerous foreign persons and companies had registered business aircraft in the United States via U.S. front companies that concealed their actual identities. I'd intended to look into this as a possible article for this newsletter, but other issues came along and I gradually lost interest. But fortunately, the issue had also come to the attention of the DOT Office of Inspector General (OIG), which released a disturbing audit report on June 27<sup>th</sup> ("FAA's Civil Aviation Registry Lacks Information Needed for Aviation Safety and Security Measures," FI-2013-101).</span></p>
<p><span>As Alan Levin summarized the findings in a Bloomberg News story, "U.S. registries of pilots and aircraft contain incomplete information that may interfere with screening for terrorists and investigations of aviation accidents." In particular, based on its sampling of FAA records of aircraft owned by trusts for non-US citizens, OIG estimates that 54% of the 10,292 aircraft registered by such trusts "lacked important information such as the identity of the trusts' owners and aircraft operators." This is a huge aviation security gap, but it's also illegal. Under the Chicago <span class="GramE">Convention which</span> regulates international aviation, "FAA has a duty to provide, upon request from appropriate foreign civil aviation authorities, accurate information on U.S.-registered aircraft operated in foreign countries." OIG's report notes that there have been "numerous accidents, operational errors, and other incidents involving U.S. aircraft registered to trusts for non-U.S. citizen beneficiaries. Because the Registry lacks information on these aircraft, FAA is at risk of not being able to meet its duty under the Convention and answer these authorities' requests for information."</span></p>
<p><span>That was the main headline finding of the audit, but there are other worrisome findings. It turns out the Registry of information on planes and pilots is insecure, because "FAA has not implemented needed security controls over the Registry's configurations and account management to minimize the risk of unauthorized access to PII [Personally Identifiable Information<span class="GramE">].</span> . . . FAA is also not in compliance with DOT policies calling for PII encryption and account access controls." Furthermore, FAA "does not have agreements in place with external parties that receive Registry information to protect PII to prevent unauthorized access," as required by the Federal Information Security Management Act. And FAA's recovery plan for the Registry "does not meet DOT's information technology security policy requirements."</span></p>
<p><span>FAA responded to the audit's eight recommendations, concurring with some and partially concurring with others. But OIG disagreed, on the matter of non-citizen trusts, that FAA's recent publication of a revised policy will fix the problem, and also differed with FAA's response on three of the other recommendations. After explaining why OIG disagrees and considers these recommendations still open, it added, "Given FAA's reactions to our recommendations, we remain concerned that the integrity and privacy of the Registry's data will remain at risk." And on the specific topic of the non-citizen trusts, the auditors <span class="GramE">write that</span> "We are conducting additional audit work on the relationships between these trustees and the anonymous owners/beneficiaries."</span></p>
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<p><span><strong><a name="e"></a>Tarmac Delay Rule's Eventual Impacts</strong></span></p>
<p><span>The US DOT's tarmac delay rule went into effect in April 2010, after 853 flights in 2009 had experienced severe-weather-related ground delays of three to five hours. The regulation aimed at punishing airlines for any delay exceeding three hours with a fine of up to $27,500 per violation. In the September 2010 issue of this newsletter I reported on a quantitative study by aviation analysts Darryl Jenkins and Joshua Marks estimating that while the rule would spare 110,000 passengers per year of long ground delays, it would also spur airlines to cancel 2,600 flights to avoid the penalties, thereby harming another 200,000 passengers, with an overall net cost to air travelers of $3.5-3.9 billion.</span></p>
<p><span>How are things shaking out three years later? A relatively new aviation data firm called <span class="SpellE">masFlight</span>, <span class="GramE">whose</span> CEO is Joshua Marks, has released an assessment. Cancellation rates did increase in the stormy 2011 summer season, but by 2012-13 they appear to be returning to historical levels, aided by a very mild winter 2011-12. Instead of the predicted excessive cancellations to avoid DOT fines, airlines are doing a lot more premature returns to the gate: the return-to-gate rate has grown from 58.9 per 10,000 departures in 2009-10 to 66.9 in 2012-13. The way DOT has interpreted its tarmac delay rule, if a flight is at risk of a three-hour delay, it must be <em>back at the gate</em> by 180 minutes after <span class="GramE">push-back</span>, which apparently leads many airlines to make the return-to-gate decision after just 90 minutes. Historical data suggest that most flights still waiting at 120 minutes would depart before 180 minutes, but airlines don't want to risk the fines.</span></p>
<p><span>So <span class="SpellE">masFlight</span> has crunched the numbers from DOT's Part 234 data and found that before the rule went into effect, 8,063 passengers/month were returned to the gate, spending an additional 83 minutes there before re-departing. By 2012-13 those numbers had increased to 11,028 passengers/month, spending an additional 94 minutes at the gate.&nbsp; The total passenger hours spent at the gate after gate returns increased 52%, to 1,075,000 per month or 12.9 million passenger hours per year. Besides these initial delays, many of the passengers involved also miss their connections due to their very late ultimate departures.</span></p>
<p><span>Incidentally, DOT never published a schedule of fines, nor did it precisely define what a violation of the rule consisted of. It has therefore avoided any legal test of whether the $27,500 fine applies per passenger or per flight by obtaining consent agreements from those it has cited for violating the rule.</span></p>
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<p><span><strong><a name="f"></a>Airport Privatization News from Spain</strong></span></p>
<p><span><em>The following commentary is by David J. Bentley of Big Pond Aviation, Manchester, UK. </em></span><a href="http://www.bigpondaviation.com"><span><em>www.bigpondaviation.com</em></span></a><span><em></em></span></p>
<p><span>The Spanish infrastructure company <span class="SpellE">Abertis</span> sold its stake in London Luton airport at the end of July, thus reducing its exposure to airports almost to zero following a clutch of other disposals. The sale was to its Spanish co-investor AENA, with which it jointly owned the lease on Luton Airport in the ratio <span class="SpellE">Abertis</span> 90%/AENA 10%. AENA is joined now as the new <span class="GramE">lease holder</span> by AXA Private Equity (France) in the ratio AENA 51%/AXA 49%. AXA is a relative newcomer to the business but had previously (August 2011) joined a consortium to bid in tandem with <span class="SpellE">Abertis</span> (!) and CVC Capital Partners for the Madrid and Barcelona (AENA) airport concessions (for which the <span class="GramE">bidding was then cancelled by the newly elected government</span>).</span></p>
<p><span>The enterprise value of the Luton transaction is &euro;488 million. This asset would have contributed an estimated &euro;141 million to <span class="SpellE">Abertis</span>' revenue and &euro;46 million to EBITDA at group level in 2013, which represents a 2013 Enterprise Value/EBITDA ratio of 11X. The transaction, which is subject to approval by the competition authorities, the contracting authority (Luton<strong> </strong><strong><span style="font-weight: normal;">Borough Council</span></strong>) and the <strong><span style="font-weight: normal;">Spanish Board of Ministers</span></strong>, forms part of <span class="SpellE">Abertis</span>' strategy to revise its infrastructure portfolio away from airports. London Luton Airport had been part of <span class="SpellE">Abertis</span>' portfolio since 2005, when the company and AENA <span class="SpellE">Internacional</span> purchased the British operator TBI, which was a real estate company until it decided to focus on airports, and which had previously acquired the assets of Airports Group International (AGI) in North and South America. <span class="SpellE">Abertis</span> has bid for individual and group airports across the world, and subsequently (2007) acquired <span class="SpellE">Desarrollo</span> de <span class="SpellE">Concesiones</span> <span class="SpellE">Aeroportuarias</span>, a holding company with&nbsp;stakes in 15 airports in Mexico, Jamaica, Chile and Colombia. But since three airports managed by its subsidiary in Bolivia, SABSA, were renationalised in February 2013, its airport business has been on a downward slope.</span></p>
<p><span>Two months ago, <span class="SpellE">Abertis</span> announced an agreement with the Houston-based <strong><span style="font-weight:normal; ">ADC &amp; HAS Airports Worldwide</span></strong> selling it Belfast International and Stockholm <span class="SpellE">Skavsta</span> airports, the terminal concessions for <span class="SpellE">Orlando</span> Sanford Airport, and TBI's airport management business for &euro;284 million in cash. <span class="SpellE">Abertis</span> had previously agreed to sell Cardiff Airport to the <strong><span style="font-weight:normal;">Government of Wales</span></strong> for &euro;61 million following criticism of inadequate investment (the same as in Bolivia). Following the completion of the two recent sale agreements, <span class="SpellE">Abertis</span>' airport business will be limited to a stake in <span class="SpellE"><strong><span style="font-weight: normal;">Grupo</span></strong></span><strong><span style="font-weight: normal;"> <span class="SpellE">Aeroportuario</span> del <span class="SpellE">Pac&iacute;fico</span></span></strong> in Mexico and the concession for Montego Bay Airport in Jamaica. Both assets remain held for sale. </span></p>
<p><span>Elsewhere in Spain, Ciudad Real Central Airport, located 100 miles south of Madrid and one of Spain's infamous ghost airports, is up for auction, with a starting price of &euro;100 million, a fraction of the construction cost of &euro;1 billion, which was financed through an ambitious PPP scheme. The new owner will, however, take on the airport's &euro;529 million debt. The <span class="SpellE">Castilla</span>-La Mancha airport is currently going through bankruptcy proceedings, and the <span class="GramE">sale has been ordered by the case's overseeing judge</span>. Once sold, there are a number of parties waiting in line for compensation. The auction house will claim roughly &euro;2 million, followed by 72 airport workers made redundant. A variety of savings banks (&euro;233 million), Iberia franchise Air Nostrum (&euro;2.6 million) and Air Berlin, the biggest airline brave enough to have tried to make a go of it at Ciudad Real (&euro;1.8 million) are also <span class="GramE">owed</span> dues, and local residents whose property was compulsorily purchased to construct the airport are claiming a further &euro;106 million. The financially strapped Spanish government is unable to assist with a funding package.</span></p>
<p><span>Two other ghost airports are </span><span><strong><span style=" font-weight:normal;">Castell&oacute;n</span></strong></span><span><strong><span style="font-weight: normal;"> Airport north of Valencia, which has yet to see a commercial flight and which is now thinking of opening </span></strong></span><span>with flexible hours pending service schedules on a "more flights, more hours of operation" basis and Cordoba Airport in <span class="SpellE">Andalucia</span>, which has yet to attract interest from any commercial carriers after completing its runway extension on 25 July. The project lengthened the runway&nbsp;from 1380m to 2050m, and was completed with the support of local hoteliers and entrepreneurs in the hopes of attracting commercial services.</span></p>
<p><span>There are possibly better prospects for Murcia International Airport, a <span class="GramE">greenfield</span> facility in the Costa Blanca region, where a <a name="article-254382"></a>concession grant will be awarded before the end of the year so that the facility can commence operations in the early months of 2014. This is another PPP project, similar to those at Ciudad Real and Castellon.</span></p>
<p><span>The Spanish g<strong><span style="font-weight:normal; ">overnment</span></strong> is still considering privatizing 51% of AENA, despite fears among unnamed airlines over the development of a "private monopoly" which might increase airport charges further and negatively impact the provision of services. <span class="SpellE">Ferrovial</span>, which distances itself increasingly from Heathrow Airport Holdings in the UK, is the betting man's choice to "save AENA" if the government cedes a majority stake in the company. Before that, AENA may be </span><span>split into separate airports and air navigation units before the privatization, which may now come in 1Q2014. The delay in privatization to 2014 from the <span class="GramE">Fall</span> of 2013 is apparently to allow traffic numbers to recover, after a fall in passengers of 9.7% year-on-year in 1H2013, with Madrid Barajas Airport particular seeing a year-on-year fall of 14.7% in passengers in 1H2013. <a name="article-254385"></a>Some of the coastal vacation airports are doing much better.</span></p>
<p><span><em>Editor's Note: columnist David Bentley is working on a report titled "UK Airport Capacity&mdash;Unraveling the Conundrum: A Special Report referenced to the work of the Airport Commission," to be published before the end of September.</em></span></p>
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<p><strong><a name="g"></a>News Notes</strong></p>
<p><span style="text-decoration: underline;">Orlando Airport Considering Outsourced Screening</span>. Members of the board of the Orlando International Airport (MCO) visited San Francisco International Airport in August, to learn more about its contractor-provided passenger and baggage screening under TSA's Screening Partnership Program (SPP). Board member Dean Asher told the <em>Orlando Sentinel</em> that their goal is to achieve a partnership for airport screening. No timetable has been announced for the board to reach a decision.<span style="text-decoration: underline;"></span></p>
<p><span style="text-decoration: underline;">De-Icing Manager Offered in <span class="SpellE">Aerobahn</span></span>. Saab <span class="SpellE">Sensis</span> has announced an addition to its <span class="SpellE">Aerobahn</span> Product Suite. In addition to its Surface Manager, Departure Manager, and Airport Dashboard features, <span class="SpellE">Aerobahn</span> can now provide a De-Icing Manager for real-time situational awareness of the entire de-icing process. Versions of <span class="SpellE">Aerobahn</span> are in use at 25 major airports worldwide including five of the 10 busiest U.S. airports (Atlanta, Charlotte, Denver, JFK, and Phoenix).<span style="text-decoration: underline;"></span></p>
<p><span class="GramE"><span style="text-decoration: underline;">Charlotte Airport Governance Decision to FAA</span>.</span> The ongoing saga of who will manage Charlotte Douglas International Airport took a new twist early in August, when a county judge ruled that the change from city control to a joint city/county airport commission&mdash;as enacted by the state legislature&mdash;<span class="GramE">cannot</span> go into effect unless and until the FAA approves. The measure was enacted to replace a bill passed in July that would have transferred control of the airport to a newly created airport authority instead of the city. That measure was dropped after a lawsuit from the city led to an injunction blocking that transfer, leading instead to the law creating the joint city/county commission.<span style="text-decoration: underline;"></span></p>
<p><span class="GramE"><span style="text-decoration: underline;">Four Teams Qualify for LaGuardia PPP</span>.</span> The Port Authority of New York &amp; New Jersey selected four teams from among those submitting their qualifications to design, finance, build, and operate a new central terminal at LaGuardia Airport. The teams are led by (1) Hunt-VRH and Fentress Architects, (2) Skanska, <span class="SpellE">Tishman</span>, Parsons Brinckerhoff, HBK, and Vantage Airport Group, (3) Lend Lease, Turner, <span class="SpellE">Gensler</span>, Macquarie Capital, and <span class="SpellE">Hochtief</span>, and (4) STV, Arup, and Kohn Pederson Fox. The estimated cost of the project is $1.5 billion.<span style="text-decoration: underline;"></span></p>
<p><span style="text-decoration: underline;">CLEAR Adding Four More Airports</span>. During August CLEAR announced four additions to its front-of-the-line service. The San Antonio <span class="SpellE">CLEARlane</span> opened August <span class="GramE">1<sup>st</sup> ,</span> and San Jose International will open in September. Coming this fall will be CLEAR at both Houston Hobby and Houston's George Bush Intercontinental. CLEAR allows members with biometric ID cards to bypass screening lines but receive regular TSA screening. <span style="text-decoration: underline;"></span></p>
<p><span class="GramE"><span style="text-decoration: underline;">Two Finalists for Midway Airport Lease</span>.</span> Two of the prequalified teams in late July submitted bids to lease Chicago's Midway Airport for 40 years. London Heathrow's largest owner <span class="SpellE">Ferrovial</span> teamed with Macquarie's infrastructure group as Great Lakes Airport Alliance. Competing with them was the bid from Industry Funds Management teamed with Manchester Airports Group. Final bids will be due in September, with a decision announced sometime this fall.<span style="text-decoration: underline;"></span></p>
<p><span style="text-decoration: underline;">Branson Airport's Runway Problem</span>. Privately owned Branson (MO) Airport has sued a group of airport contractors over the collapse of a portion of the airport's runway in 2011, just two years after the airport opened. The suit seeks unspecified damages over the failure of the $70 million runway. The airport is in default on its $113 million in tax-exempt bonds and continues to operate under a several-year forbearance agreement with its creditors.<span style="text-decoration: underline;"></span></p>
<p><span class="GramE"><span style="text-decoration: underline;">Yet Another Delay for New Berlin Airport</span>.</span> The long-delayed opening of the <span class="GramE">new</span> Berlin Brandenburg International Airport (BBI) has been postponed yet again, the fifth time this has happened. The previous delay was announced in the spring of 2012, only weeks before BBI had been set to open. In July of this year, the airport CEO said he would announce the opening schedule in October, but in mid-August said the opening date would be announced sometime in the next several months. Instead of a full opening, BBI will begin with only the north pier of the new terminal, for a handful of daily flights.<span style="text-decoration: underline;"></span></p>
<p><span class="GramE"><span style="text-decoration: underline;">Seattle to Supply Air Conditioning for All Planes</span>.</span> Under a $43 million project, Seattle-Tacoma International Airport (SEA-TAC) will supply conditioned air to planes parked at all 73 of its gates, to avoid the aircraft having to operate their APUs to provide air conditioning while at the gates. The change is projected to save airlines $15 million a year in fuel, which SEA-TAC says will provide a three-year payback period while also reducing exhaust emissions. Half the cost of the project is being funded by a grant from FAA, with the airport funding the rest from its airline charges. <span style="text-decoration: underline;"></span></p>
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<p><strong><a name="h"></a>Quotable Quotes</strong></p>
<p>"[<span class="GramE">I]t</span> seems doubtful that American can wait in Chapter 11 until this antitrust case is resolved. Unless the case is quickly settled, American is pretty much going to have to put off the merger for now. And maybe American can reinvent itself as a kind of specialty carrier, or a largely domestic operation like JetBlue. But otherwise, one has to wonder if the carrier can survive in a world now of international behemoths like United Airlines, International Airlines Group, Lufthansa Group, and Emirates. I'm not an antitrust expert, but imposing the antimonopoly norm on a market that is already somewhat warped by things like prohibitions on cross-border mergers strikes me as a bit suspect. And the Justice Department has to worry that without the merger, American will be the kind of 'vigorous competitor' that Eastern Airlines and Pan Am are now."<br /> &mdash;Stephen <span class="SpellE">Lubben</span>, "The Future of American Airlines," <em>New York Times</em>, Aug. 14, 2013</p>
<p>"[<span class="GramE">T]he</span> U.S. has constructed an antiterrorism enterprise so immense, so costly, and so inexorably interwoven with the defense establishment, police and intelligence agencies . . . that the idea of downsizing, let alone disbanding such a construct, is an exercise in futility. . . . Over the coming years, many more Americans will die in car crashes, of gunshot wounds inflicted by family members, and by falling off ladders than from any attack by Al Qaeda. There is always the nightmare of terrorists acquiring and using a weapon of mass destruction. But nothing would give our terrorist enemies greater satisfaction than that we focus so obsessively on that remote possibility and restrict our lives and liberties accordingly."<br /> &mdash;Ted Koppel, "America's Chronic Overreaction to Terrorism," <em>Wall Street Journal</em>, June 28, 2013; updated Aug. 6, 2013</p>
<p>"The chance of dying in an airplane is vanishingly small. The chance of being killed by a terrorist in an airplane is smaller still. Mark Stewart, a civil engineer who studies probabilistic risk, has put the odds at one in 90 million in a year. Looking at these figures dispassionately, one might wonder if the Transportation Security Administration has found the right balance between safety and convenience with its notoriously burdensome airport screening <span class="GramE">procedures.</span> . . . It is time to stop pretending that annoying protocols like these are all that stand between <span class="GramE">us and devastation</span>. The most effective security innovation post-9/11 was also the simplest: the reinforcement of cockpit doors, which has made it virtually impossible to hijack an aircraft. As things stand, the TSA asks its officers to enforce rules of questionable utility while giving them remarkably little discretion; they're more like hall monitors than intelligence personnel. That is a huge waste of human talent and a source of inefficiency."<br /> &mdash;Editorial Board, "Airport Security without the Hassle," <em>New York Times</em>, July 27, 2013</p>
<p><a href="#top">&raquo; return to top</a></p>1013513@http://www.reason.orgSat, 31 Aug 2013 15:45:00 EDTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #92http://www.reason.org/news/show/airport-policy-and-security-news-92
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">The future of outsourced airport screening</a></li>
<li><a href="#b">Second try for San Diego's Brown Field</a></li>
<li><a href="#c">TSA slow to expand trusted traveler</a></li>
<li><a href="#d">Startup airlines test new business models</a></li>
<li><a href="#e">Airport privatization news from Europe</a></li>
<li><a href="#f">News Notes</a></li>
</ul>
<p><span><strong>The Future of Outsourced Airport Screening</strong></span><a name="a"></a></p>
<p><span>Last month I wrote about how TSA seems to be stonewalling on language in the 2012 FAA reauthorization bill that was intended to require the agency to resume complying with the 2001 law (which created TSA) that allows all US airports to opt out of TSA-provided screening. Although the agency has accepted applications from six new airports since the new law was passed in February 2012, it has yet to select a contractor and finalize an agreement with any of them. And it has also held off on rebidding expired screening contracts at San Francisco and Kansas City.</span></p>
<p><span>So I was taken aback by a July 5 headline in <em>Homeland Security Today</em> reading, "IG: TSA Fixes Problems in Hiring Private Screeners." The article was a brief summary of a report from the DHS Office of Inspector General (OIG-13-99) released June 20<sup>th</sup>, "Transportation Security Administration's Screening Partnership Program." The IG's office did the report at the request of Sens. Roy Blunt (R, MO) and Bob Corker (R, TN). Blunt's letter was, well, blunt, saying that "TSA has never fully embraced the SPP" and "has recently taken a series of actions and made a number of decisions which have been detrimental to the SPP," citing "TSA's arbitrary rejection of airport 'opt-out' requests and onerous requirements on airports who wish to participate in the SPP." He asked the IG to investigate "whether TSA acted outside its own regulations and procedures" or "taken any actions that exceed its statutory authority," etc.</span></p>
<p><span>Unfortunately, the IG auditors interpreted this request quite narrowly, so their report focuses on process rather than substance. And in fact, TSA has been developing a convoluted process to review an airport's application, assess whether or not it should be allowed to enter SPP and present that analysis to the Administrator. Prior to the Administrator's decision, the agency's Program Management Office must estimate the cost of using private screeners at the airport and the Office of Security Operations must estimate the cost of using federal (TSA) screeners there. If the Administrator approves, the Office of Acquisition initiates the procurement process that includes solicitation, evaluation, selection, and contract award. According to the audit, each procurement process is unique, with TSA selecting the evaluation factors to be used, developing a source selection plan, establishing the evaluation standards, holding a pre-proposal conference, and doing visits and site surveys. </span></p>
<p><span>The focus of the IG audit is not how convoluted and time-consuming this process is but rather on how well TSA documents it and whether its cost comparisons are valid&mdash;a point on which TSA has been criticized for years by the GAO and others. And indeed, the audit uncovered several recent cases of under-estimating TSA screening costs and over-estimating contract screening costs. But because the cost-comparison process is still being worked on, none of the recent applications have been analyzed based on it, and the IG takes TSA's word that the standards for cost comparison will be finalized sometime in 2013.</span></p>
<p><span>What the Senators should have asked for is an assessment of whether the TSA should be in charge of deciding whether airports can participate in SPP and whether TSA itself should be running the procurement process and selecting the contractor. An alternative approach is explored in "Overhauling U.S. Airport Security Screening," a new Reason Foundation policy brief by my transportation colleague Shirley Ybarra (</span><a href="http://reason.org/news/show/overhauling-us-airport-security-scr"><span>http://reason.org/news/show/overhauling-us-airport-security-scr</span></a><span>). It notes that the original 2001 legislation grants <em>all US airports</em> the right to opt out of TSA-provided screening and sets out the requirements the for contractors to become TSA-certified. If Congress really intends all airports to have this opportunity, the alternative way forward is to let each airport issue its own RFP, to which only TSA-certified contractors may respond, and the outcome of which TSA must approve before it can be finalized.</span></p>
<p><span>The Reason paper also raises the broader question of the conflict of interest built into the 2001 legislation, under which TSA is both the regulator of aviation security and the provider of airport screening&mdash;i.e., when it comes to most aspects of airport security, TSA regulates at arm's length, but when it comes to screening (except at SPP airports), it regulates itself. A large table in the report shows that none of the principal airports in Europe have such a situation. Nearly all use approved screening contractors, though a few use police or other government agencies&mdash;but not the national aviation security regulator. The same holds true for Canada, where all airport screening is outsourced.</span></p>
<p><span>The paper also summarizes the cost comparison between contract screening at SFO and TSA screening at LAX done in 2011 by the House Transportation &amp; Infrastructure Committee. It's high time GAO reviewed those findings as a follow-up to its previous work on comparative costs of TSA and contract screening. And it's pretty clear that the reforms included in the 2012 FAA bill are not doing the job they were intended to do. Congress clearly needs to revisit this issue. </span></p>
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<p><span><strong>A Second Try for Brown Field in San Diego</strong></span><a name="b"></a></p>
<p><span>More than 10 years ago, in 2001, a several-year effort to privatize a general aviation airport in southern San Diego was terminated, when the city council failed to renew its development agreement with Diversified Asset Management Group. The company's plan to lease the sleepy GA airport and turn it into a major cargo hub, relieving congested Lindbergh Field, fell victim to opposition from private pilots and nearby residents. The failed privatization effort held one of the early slots in the federal Airport Privatization Pilot Program.</span></p>
<p><span>But a new, and better thought-out, Brown Field project is now under way to "privatize without really privatizing," and therefore without requiring exemptions from federal grant restrictions that the Pilot Program was enacted to facilitate. The new effort is primarily focused on improving Brown Field's aviation infrastructure (to the tune of $108 million) and carrying out airport-compatible real-estate development on the property. The objective is to create a "first-tier aviation-based business park." </span></p>
<p><span>Those words come from a presentation given by Richard Sax, president of Premier Jet, who is the driving force behind the new plan for Brown Field. When Sax talks about an aviation-based business park, he knows whereof he speaks, since his company has developed a smaller version at McClellan-Palomar Airport in Carlsbad, north of San Diego. They built 60,000 sq. ft. of Class A office space above hangars, so as to bring businesses that own and operate business jets to the airport.</span></p>
<p><span>In his presentation at last month's AAAE/LeighFisher Associates airport privatization and public-private partnerships conference in Washington, DC, Sax unveiled his Brown Field plan. The airport has two runways on over 800 acres, offering ample room for aviation business park development. He told attendees that the company did a 25-year aviation projection for the FAA to demonstrate how the airport could accommodate increased flight activity along with significant business development. Plans include a new FBO facility, a separate helicopter FBO, 10 hangars, and office space. The company is not seeking city or federal funding, but is seeking additional private investors. They have a long-term lease for non-aviation portions of airport land, and will sublease parcels to other developers. Another panel member suggested that this model is analogous to the highly successful Alliance Airport and business park in Fort Worth, in which the government owns the runways and aviation facilities and a major private developer has been responsible for developing and marketing the extensive business park operations located on and adjacent to airport land.</span></p>
<p><span>It's good news that the FAA is supportive of this public-private partnership, based on the success of both Alliance and of Premier Jet's project at McClellan-Palomar. Thus far, the city is also on board, and I am not aware of any significant GA or airport neighbor opposition.</span></p>
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<p><span><strong>TSA Moving Slowly on Expanding Trusted Traveler</strong></span><a name="c"></a></p>
<p><span>There's a bit of good news about TSA's PreCheck program that offers expedited airport screening for those who qualify. First, Virgin America joined the program early last month, bringing to six the number of participating US airlines. (Come on, Southwest and JetBlue: get with the program!) And TSA reported that by the end of May it had screened 10 million air travelers through PreCheck lanes. However, that is a long way from several announced goals for the program, which have envisioned as many as one-quarter of each day's passengers eventually qualifying for expedited screening as "trusted travelers."</span></p>
<p><span>Besides automatically enrolling the growing number of Global Entry members in PreCheck, TSA's main expansion initiative has been to engage the private sector to screen applicants on a commercial basis, presumably in exchange for a fee of some sort. In January TSA issued a Request for Information, asking interested firms to submit "white papers" outlining their ideas for such a service, with proposals due April 1<sup>st</sup>; each had to be sponsored by one or more airports. The companies were led to believe that those with the best proposals would be notified within 30 days, but that did not happen. One industry source told me that three or four firms did get called in for discussions prior to Memorial Day. But since then there has been no further word from TSA on the future of the program.</span></p>
<p><span>Speculation about this snail's-pace progress for an initiative clearly desired by TSA Administrator John Pistole includes two potential causes. One theory is that delay is due to many personnel changes at TSA in recent months, including a vacancy in the position in charge of this effort. Another theory is that sister DHS agency Customs &amp; Border Protection is pursuing its own expansion plan, Global Entry Lite (which would require no passport and potentially not the current criminal history background check) and therefore may see TSA's effort as competition. On the other hand, several media reports have used the term "Global Entry Lite" to describe <em>TSA's</em> private-sector initiative, so it's not clear whose program goes by that name. </span></p>
<p><span>I must also admit to some degree of worry about the security implications of these efforts to expand the set of trusted travelers. To be sure, I agree that the vast majority of air travelers are not a danger to aviation, and should not be treated as if they were. But to be sure of that in individual cases would seem to require the same kind of vetting that is routinely applied to airport employees who need regular access to secure areas: a criminal history background check and a biometric ID card (to prove that the person presenting himself or herself is actually the person previously cleared). It may be that some sophisticated algorithms developed in the private sector can be as reliable as the background checks currently used for airport workers and Global Entry members, but that must be demonstrated, not merely asserted. And whatever kind of vetting is adopted must be repeated periodically, not done only once for all time.</span></p>
<p><span>Let's hope the TSA gets its act together on this sooner rather than later.</span></p>
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<p><span><strong>Start-Up Airlines Test New Business Models</strong></span><a name="d"></a></p>
<p><span>In previous issues, I have written about the success of Porter Airlines in Canada and the start-up problems of California Pacific in San Diego County. There is news about both, but I'm also intrigued with two start-ups that have come to light over the past several months.</span></p>
<p><span>One is Lakeshore Express, which is competing with Delta and Southwest in the Midwest. Since 2011 it has been offering limited service between northern Michigan resort areas (serving Pellston) and both Chicago Midway and Oakland County airport in the Detroit suburbs. And last month it announced new service between Midway and Oakland County. The airline is using Saab 340 turboprops and offering first-class legroom, free drinks, and no bag fees&mdash;at fares lower than Southwest's fares between Midway and Detroit Metro (and lower than Delta between Detroit Metro and Pellston). Moreover, it is operating out of the general aviation terminal at Midway, as well as GA terminals at Pellston and Oakland County, so passengers have no TSA hassles.</span></p>
<p><span>A very different business model has been launched by Surf Air in California. It is offering frequent business travelers "all-you-can-fly" service among a limited set of cities for a flat fee of $1,650 per month. Its first service, launched last month, links Burbank with San Carlos in Silicon Valley, with Monterey and Santa Barbara to be added this summer. Its target market is CEOs and entrepreneurs affluent enough to pay for this kind of service but not affluent enough to purchase fractional shares in a business jet or to buy a company plane. Service is provided on turboprop Pilatus PC-12 aircraft seating six passengers. Like Lakeshore Express, it is using GA terminals, thereby avoiding TSA hassles. CEO Wade Eyerly says they have identified 53 different short-haul routes around the United States where they think the business model will work.</span></p>
<p><span>Still on the drawing board, but making progress, is the more-ambitious California Pacific, which aims to provide short/medium-haul service from Carlsbad (in affluent northern San Diego County) to destinations such as San Jose, Sacramento, Las Vegas, Phoenix, and Cabo San Lucas&mdash;but as a full-fledged scheduled airline (under Part 121). The airport currently has only commuter service to and from Los Angeles. California Pacific plans to use Embraer E-170 twinjets, seating 80+ passengers. With a runway of just under 5,000 feet, the Carlsbad airport could also support the larger Embraer E-190 family, seating up to 100 passengers. California Pacific has had a long and difficult quest for FAA certification under Part 121, which is far more demanding than what is required for much smaller operators such as Lakeshore and Surf Air., but does seem to making progress on this, under a new CEO.</span></p>
<p><span>And Porter, the successful operator of medium-haul service using 70-passenger Q400 turboprops from its base at Billy Bishop Airport adjacent to downtown Toronto, has proposed a major change in its business model in recent months. With the development of the new C-series 110-125 passenger twinjets by Bombardier, Porter hopes to gain approval to operate them from Billy Bishop. That will require two things: approval to lengthen the island airport's runway from 4,000 ft. to around 5,000 ft. (which will be controversial) and demonstrating that the CS-100 jets will actually have a noise footprint comparable to the Q400. Neither is a sure thing, but if those hurdles can be overcome, the new jet's 1,500 nm range could mean new Porter routes as far west as Winnipeg and as far south as Florida. But competitors Air Canada and WestJet have both said that if Porter gains approval for jets at Billy Bishop, they will aim to do likewise. In the interim, WestJet has begun acquiring Q400 turboprops of its own.</span></p>
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<p><span><strong><span style="font-family:">Airport Development, Financing and Privatization News from Europe</span></strong></span><a name="e"></a></p>
<p><span><em>The information in this article (which is believed to be correct at the time of writing) and comment is by David J. Bentley of Big Pond Aviation, Manchester, UK. </em></span><a href="http://www.bigpondaviation.com"><span><em>www.bigpondaviation.com</em></span></a><span><em></em></span></p>
<p><span><strong><em><span>Eurocontrol</span></em></strong></span><span> released its fourth "Challenges of Growth" study, which looks ahead to the state of air transport in 2035. It said, "Growth is expected to return, with the most likely scenario showing by 2035 . . . that traffic in Europe will pick up again significantly with an increase in the number of flights to 14.4 million, which is 50% higher than in 2012. This predicted growth is slower than that forecast five years ago, as well as having been delayed for several years." The organisation projects an increase in airport capacity by 2035 of only 17% as opposed to the 38% growth by 2030 it projected in 2008. With less capacity expansion, Eurocontrol stated: "In the most likely scenario, 1.9 million flights in 2035 would not be accommodated &ndash; i.e. 12 % of total demand. This scenario would also see more than 20 airports operating at 80% or more of capacity for six or more hours per day, compared to just three such airports in 2012. This would drive [air traffic flow] delay up to around 5-6 minutes, taking it from a minor or intermittent to a permanent, major contributor of delay, [compared with] the current 2014 EU target for en-route [ATC] delay [of] only 0.5 minutes per flight." </span></p>
<p><span>The airport capacity crunch is expected to be felt most acutely in Turkey, the UK, the Netherlands, Bulgaria, Hungary, Germany, Poland and Italy. The estimated cost to airlines and airports will be in excess of &euro;40 billion of lost revenues and &euro;5 billion in congestion costs per annum by 2035. The wider economic impact of insufficient airport capacity is estimated to&nbsp;cost Europe &euro;230 billion in lost GDP by 2035. </span></p>
<p><span>Airport sale and lease transactions are still thin on the ground but these are some that have put their head over the parapet recently:</span></p>
<p><span><em><span style="font-family:">France</span></em></span><span> has sold a 9.5% stake in Aeroports de Paris (AdP) to Predica, the life insurance subsidiary of Credit Agricole Assurances (4.81%) and to Vinci<strong> </strong><strong><span style="font-weight:normal;">SA (4.69%)</span></strong>. The sale raised &euro;738 million, leaving the French state as majority owner in AdP with a 50.6% holding. The agreement calls for Predica and Vinci to keep the AdP shares for at least 12 months and not to increase their individual stakes in the airport operator beyond 8% for at least five years. Credit Agricole, the largest retail banking group in France, has been quite heavily involved in aircraft financing but otherwise is an air transport industry newcomer. Vinci has made great efforts to kick-start its sleeping airport concessions division &ndash; taking over Airports of Portugal last year to add to its portfolio of small secondary-level managed airports in France and has coveted a larger stake in AdP since 2006. It also has its eye on the delayed privatization of the sub-primary airports in France such as those at Bordeaux, Toulouse and Marseille.</span></p>
<p><span><em><span style="font-family:">Italy'</span></em></span><span>s Civil Aviation Authority is formulating its strategies on privatizing the Palermo and Catania airports in Sicily. The Province of Palermo is keen to retain a share in that instance.</span></p>
<p><span><em><span style="font-family:">Germany</span></em></span><span>'s <strong><span style="font-weight:normal;">Rhineland-Palatinate state</span></strong> is considering selling a majority stake in loss-making Frankfurt Hahn Airport. Rhineland-Palatinate owns 82.5% of the airport, with&nbsp;<strong><span style="font-weight:normal; ">Hesse</span> s</strong><strong><span style="font-weight: normal;">tate</span>&nbsp;</strong>owning the remaining 17.5%, since Fraport walked away three years ago. The government said the potential sale would require the continued operation of the airport and its associated infrastructure, noting that more than 3,000 employees are directly employed on the airport site, with around 11,000 secondary jobs. Hahn is dominated by Ryanair (currently 95% of seat capacity) though it does have a fairly solid cargo traffic base.</span></p>
<p><span><em><span style="font-family:">Poland'</span></em></span><span>s Modlin Airport, which opened in July last year but closed to jets in December because of holes in the runway before re-opening on July 3rd, may be sold wholly or partly by the government. In the interim, low cost flights (Ryanair and Wizz Air) have been diverted to Warsaw's Chopin Airport. The sale rationale is confusing. The provincial governor spoke of seeking a private investor for a partial sale, but with the runway reopened they are thinking of offering the entire company up for sale. With a runway that takes the best part of nine months to repair (and with neither Ryanair nor Wizz Air looking for a quick return) the best offer they are likely to get is for the entire airport for a fraction of their price.</span></p>
<p><span><strong><em><span>Netherland</span></em></strong></span><span><em><span style="font-family:">s</span></em></span><span>' <strong><span style="font-weight:normal;">Twente Airport</span></strong> will reportedly open for commercial operations in 2016, after <strong><span style="font-weight:normal;">Reggeborgh (an investment firm)</span></strong><strong> </strong>and Aviapartner (a Belgian airport handling firm) purchased a 49-year concession for the former military airport's operation. The airport will receive &euro;10 million of government funding support. Ryanair among others has shown interest in commencing service to the airport.</span></p>
<p><span><em><span>Slovenia</span></em></span><span> will launch in September a sale process for 15 companies which will include its largest airport, at Ljubljana (the capital), and its national carrier, Adria Airways. The Slovenian economy is around 50% controlled by the state and is in serious trouble with many economic analysts expecting it to be the next to require an EU bailout. The processes will take two to three quarters to complete but are opposed by the governing coalition's second-largest party. Ljubljana Airport underwent a partial IPO in 2003, the smallest by far of the 15 European airports or airport groups so far to have done so.</span></p>
<p><span><strong><span style="color: windowtext; font-weight: normal;">In the <em>UK</em></span></strong></span><span><strong><span>, </span></strong></span><span><strong><span style="color: windowtext; font-weight: normal;">Exeter International Airport's</span></strong></span><span> majority stakeholder, the construction company <strong><span style="font-weight: normal;">Balfour Beatty,</span></strong> managed to sell its stake in the airport to Patriot Aerospace (the Rigby Group), which subsequently relieved Balfour Beatty of its other airport holdings, namely 95% of Blackpool Airport, and (London)Derry Airport in Northern Ireland. Balfour Beatty had purchased 60% of Exeter Airport from <strong><span style="font-weight: normal;">Devon County Council</span></strong> for &pound;60 million in 2007, but recently wrote down its stake from &pound;12 million to zero, stating "while underlying trading has not deteriorated, we believe that the timing for recovery of passenger numbers has gone further out, particularly in the light of the imposition of increased air passenger duty (APD) rates." APD is killing British aviation like a slow-acting poison and Balfour Beatty had seen the light, albeit belatedly. Flybe, the airline that is Exeter Airport's biggest client (and which is based there) is in trouble. It recently sold off all its slots at Gatwick Airport because it could no longer afford to operate there. Flybe controls no less than 93% of seat capacity and 89% of movements at Exeter. If it were to fail, all that would be left is the tiny Skybus airline that flies to the Isles of Scilly, and a few charters. That would be unsustainable. The English West Country is a graveyard for airport operators. Plymouth Airport closed down in December 2011 leaving that city as probably the largest in the country without an airport and with a lousy rail service to boot. Attracting inward investment must be a nightmare. Newquay Airport in Devon is struggling as well. </span></p>
<p><span>In <em>Spain</em>, AENA, the state operator and still the largest by passenger numbers anywhere in the world, is heading slowly back towards another attempt at partial privatization. But the government of the Canary Islands is not prepared to wait any longer and has demanded the Islands' airports should be privatised if the regional<strong> </strong><strong><span style="font-weight:normal;">government</span></strong> is not given a say in their management by AENA. The latter's privatization could be delayed to spring 2014, as the <strong><span style="font-weight:normal; ">Development Ministry</span></strong> feels this could allow for more potential investors to prepare bids for participation. </span></p>
<p><a href="#top">&raquo; return to top</a></p>
<p><a name="article-196984"></a><strong>News Notes</strong><a name="f"></a></p>
<p><span style="text-decoration: underline;">Global Entry Expanding Rapidly</span>. Customs and Border Protection's Global Entry program reached its five-year anniversary in June with the opening of three more enrollment offices: at Albuquerque and Tampa airports and in downtown Washington, DC. That brings the total to nearly 40, all but four of which are at airports. Global Entry now has 1.5 million members, with applications coming in at more than 50,000 a month. One reason for the rapid growth is that members are automatically enrolled in TSA's PreCheck program, regardless of their status in airline frequent flyer programs.</p>
<p><span style="text-decoration: underline;">All Backscatter Body Scanners Removed, Says TSA</span>. On May 30<sup>th</sup> the TSA announced that it had met its June 1 deadline to remove all 250 backscatter X-ray machines from checkpoints at US airports. All 250 were removed at the expense of manufacturer Rapiscan. There are over 700 millimeter wave body scanners in place at about 165 airports, with the remaining 300 or so airports using walk-through metal detectors instead.</p>
<p><span style="text-decoration: underline;">Peotone Airport PPP Bill Enacted</span>. The Illinois legislature finalized a bill last month authorizing the state to develop the proposed third Chicago airport in Peotone as a long-term public-private partnership. SB 20 envisions a 75-year design-build-finance-operate-maintain concession with an investor-owned company to develop and operate the airport, for which Illinois DOT has been acquiring land. Peotone is about 40 miles south of the downtown Chicago Loop, and the airport site is adjacent to the planned Illiana Expressway, currently under development by the DOTs of Illinois and Indiana.</p>
<p><span style="text-decoration: underline;">Reverse Privatization in Bahamas</span>. The Bahamas government on July 1<sup>st</sup> took over the Grand Bahama International Airport and its control tower, which had been owned and operated for nearly 50 years by the Grand Bahama Airport Company, a subsidiary of Hutchison Whampoa of Hong Kong. That company retains ownership of Freeport Harbour Company and Freeport Container Port. The Ministry of Transport is setting up an airport authority for Grand Bahama, and is in the process of creating a Civil Aviation Authority as the aviation regulator. A new airport authority is also being set up for the Marsh Harbor Airport on Abaco.</p>
<p><span style="text-decoration: underline;">Gittens Says USA Out of Step on Airport Funding</span>. The head of Airports Council International, Angela Gittens, criticized the current US airport funding system in a May 20<sup>th</sup> speech at the Aero Club of Washington. She said the government needs to end its "micromanagement" of airport finance and emulate airport policy overseas where airports "have more flexibility and freedom to finance their expansion." Overseas, most large airports depend heavily on per-passenger charges similar to the U.S. passenger facility charge (PFC), but typically in the range of $20-25 per passenger, in many cases generating a larger share of airport funding than landing fees</p>
<p><span style="text-decoration: underline;">Gary Gets Eight Responses to PPP Request</span>. The Gary/Chicago International Airport Authority received eight responses to its request for interest and qualifications for PPP development of the airport. The responses varied considerably, with many emphasizing real estate development over passenger and/or cargo service. The Authority hopes to issue a Request for Proposals to a subset of firms by the end of July, with responses due by the end of August, a highly ambitious schedule.</p>
<p><span style="text-decoration: underline;">New Airline Competition at Stansted</span>. New airport owner Manchester Airport Group has signed an agreement with low-cost carrier EasyJet to double its passenger volume over the next five years. That will mean new competition for Ryanair, which accounts for about 75% of seat capacity at Stansted currently. <em>Aviation Daily</em> reports that MAG "is seeking to lessen its dependence on Ryanair to increase overall traffic at the airport by encouraging other carriers to expand there."</p>
<p><span style="text-decoration: underline;">Canada Selects Winner for Nunavut Airport Upgrade</span>. A consortium that includes Bouygues Building Canada and Winnipeg Airports Authority has been selected over two other bidders for a $303 million design-build-finance-operate-maintain project to upgrade the Iqaluit International Airport in the northern territory of Nunavut. The airport is the only means of access to the region, which lacks roadways. The project will provide a new terminal and upgraded ramps and runway. Construction will begin in 2014 with a planned 2017 completion date.</p>
<p><span style="text-decoration: underline;">New Airport Databases</span>. The CAPA &ndash; Centre for Aviation will shortly release a new suite of online airport related databases, comprising Airport Construction, Development &amp; Cap Ex; Ownership &amp; Privatisation; Charges &amp; Benchmarking; Route Analysis; Traffic; Rankings; and Fares. The first two sections (Construction and Ownership) have been compiled in conjunction with Big Pond Aviation. For more information contact David Bentley at db&#64;bigpondaviation.com.</p>
<p><a href="#top">&raquo; return to top</a></p>1013452@http://www.reason.orgThu, 11 Jul 2013 13:56:00 EDTbob.poole@reason.org (Robert Poole)Overhauling U.S. Airport Security Screeninghttp://www.reason.org/news/show/overhauling-us-airport-security-scr
<p>The legislation that created the TSA &ndash; the Aviation &amp; Transportation Security Act (ATSA) of 2001 &ndash; built in a conflict of interest for the new agency. On the one hand, TSA is designated as the agency that establishes transportation security policy and regulates those that provide transportation operations and infrastructure (airlines, airports, railroads, transit systems, etc.). But on the other hand, TSA itself is the operator of the largest component of airport security: passenger and baggage screening.</p>
<p>The result is that when it comes to screening, TSA has a serious conflict of interest. All other aspects of airport security &ndash; access control, perimeter control, lobby control, etc. &ndash; are the responsibility of the airport, under TSA&rsquo;s regulatory supervision. But for screening, TSA regulates itself. Arm&rsquo;s-length regulation is a basic good-government principle; self-&shy;regulation is inherently problematic.</p>
<p>In practice, no matter how dedicated TSA leaders and managers are, the natural tendency of any large organization is to defend itself against outside criticism and to bolster its image. And that raises questions about whether TSA is as rigorous about dealing with performance problems with its own workforce as it is with those that it regulates at arm&rsquo;s length, such as airlines and airports.</p>
<p>Having TSA operate airport screening also conflicts with the principle that an airport should have a unified approach to security, with everyone responsible to the airport&rsquo;s security director. Numerous problems with split security have been reported at U.S. airports over the past decade, where certain responsibilities have fallen between the cracks, and neither the airport nor the TSA was on top of the problem.</p>
<p>To address these problems, two reforms should be pursued. The most urgent one is to further reform the current Screening Partnership Program (SPP). Recent legislation that puts the burden of proof on TSA in denying an airport&rsquo;s request to opt out of TSA-provided screening is a modest step in the right direction, given that ATSA allows all airports to opt out via SPP. But TSA&rsquo;s overly centralized approach still needs correcting. SPP should be reformed so that:</p>
<ul>
<li>The airport, not TSA, selects the contractor, choosing the best-value proposal from TSA-certified contractors.</li>
<li>The airport, not TSA, manages the contract, under TSA&rsquo;s regulatory oversight of all security activities at the airport in question. </li>
</ul>
<p>A more comprehensive reform would be to revise the ATSA legislation by removing the conflict of interest that Congress built into that law. The revision would devolve the responsibility for passenger and baggage screening from TSA to individual airports, as part of their overall security program. Airports would have the option of either hiring a qualified screener workforce or contracting with a TSA-certified security firm. This change would produce greater accountability for screening performance and would also bring the United States into full conformity with International Civil Aviation Organization standards.</p>1013446@http://www.reason.orgTue, 09 Jul 2013 00:00:00 EDTbob.poole@reason.org (Robert Poole)Airport Policy and Security News #91http://www.reason.org/news/show/airport-policy-and-security-news-91
<p><strong>In this issue:</strong></p>
<ul type="disc">
<li><a href="#a">TSA's new hurdles for contract screening</a></li>
<li><a href="#b">Reports paint mixed picture for airport growth</a></li>
<li><a href="#c">Cockpit security under threat</a></li>
<li><a href="#d">Airport privatization gaining altitude</a></li>
<li><a href="#e">New York airports group up and running</a></li>
<li><a href="#f">Airport privatization in Europe</a></li>
<li><a href="#g">Upcoming Conference</a></li>
<li><a href="#h">News Notes</a></li>
</ul>
<p><span><strong><a name="a"></a>TSA Putting New Hurdles on Road to Screening Opt-Out</strong></span></p>
<p><span>Despite Congress more than a year ago directing the TSA to speedily process airport applications to use TSA-certified screening contractors under its Screening Partnership Program (SPP), the agency appears to be stone-walling. Industry sources tell me that even though applications have been approved for six airports, not a single new SPP contract has been awarded by TSA since the 2012 legislation (part of FAA reauthorization last February) was enacted.</span></p>
<p><span>In some cases, procurements that were under way have been pulled back, to be re-started at some unnamed future date. That's the case for a four-airport Montana solicitation begun last October, due to be completed by the end of February 2013. Not a word was heard during March, but finally, on April 17<sup>th</sup>, contenders received a letter from TSA cancelling the procurement and saying it would be re-started at a later date. Orlando-Sanford's approved application is still without a contract solicitation and Sarasota-Bradenton application awaits action.</span></p>
<p><span>What appears to be happening is that TSA while TSA has adhered to the letter of the law contained in last year's legislation directing actions on applications, it has come up with a new hurdle for airports and contractors to surmount: a "cost-efficiency" factor. At the April 12th bidder's conference for re-bidding the SPP contract for San Francisco (SFO), bidders were told that no contract will be awarded unless it meets TSA's cost-efficiency target. The same provision was added at the last minute to the requirements for re-bidding the Kansas City contract earlier this year.</span></p>
<p><span>What this means, exactly, is not yet clear. It appears that TSA has taken language from the SPP provisions of the 2012 FAA bill and used it to create a requirement that no SPP contract will be awarded if the cost to the government would be higher than what it currently costs TSA to provide screening at the airport in question. Taken at face value, that sounds uncontroversial. But as the GAO has pointed out in several reports, TSA still has not fully and accurately reported all its screening costs, and TSA still <em>claims</em> that its own screening costs less than contract screening under SPP. </span></p>
<p><span>In its 2008 study (GAO-09-27R), the agency faulted TSA's cost comparisons for omitting the cost of overlapping TSA administrative staff at SPP airports, and failing to include TSA costs for workers' comp, general liability insurance, and some retirement costs. Not mentioned in this report, but relevant to accurate cost comparisons, TSA also does not include the cost of using its screener flying squad (the National Deployment Force) to fill in at TSA-screened airports. In March 2011, GAO reported that TSA had "made progress in addressing the limitations related to costs" (GAO-11-375R), but still had work left to do. GAO's most recent report in December 2012 (GAO-13-208) focused on screener performance at TSA and SPP airports, and did not address whether TSA was finally including all costs in its comparisons of screening.</span></p>
<p><span>And as I noted at the time, GAO's 2012 report ignored a detailed study by the staff of the House Transportation &amp; Infrastructure Committee: a case study of the cost of screening at two major hub airports, both in TSA's high-risk Category X&mdash;Los Angeles and San Francisco. The former has TSA screening and the latter is one of the original pilot program airports using a TSA-approved screening contractor. Even though federal law requires SPP contractors to pay screeners comparable wages and benefits as TSA, the study found that the cost per screener at SFO was 5.3% less than TSA's cost at LAX. While that may not sound like much, when combined with much higher productivity at SFO (16,113 passengers per screener at SFO vs. 9,765 at LAX, due mostly to a good mix of part-time and full-time screeners at SFO), the overall result would be 42.6% lower screening cost at LAX if the SFO contract model were applied there (see table).</span></p>
<table border="1" cellpadding="3" cellspacing="3" width="100%">
<tbody>
<tr>
<td colspan="4" valign="top">Cost Saving if LAX Had Contract Screening</td>
</tr>
<tr>
<td valign="top">&nbsp;</td>
<td valign="top">
<p><span>TSA Model&nbsp; </span></p>
</td>
<td valign="top">
<p><span>Contract Model</span></p>
</td>
<td valign="top">
<p><span>Savings</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>Cost per FTE Screener</span></p>
</td>
<td valign="top">&nbsp;</td>
<td valign="top">&nbsp;</td>
<td valign="top">&nbsp;</td>
</tr>
<tr>
<td valign="top">
<p><span>Salary</span></p>
</td>
<td valign="top">
<p><span>$38,480</span></p>
</td>
<td valign="top">
<p><span>$38,480</span></p>
</td>
<td valign="top">
<p><span>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>National Deployment Force</span></p>
</td>
<td valign="top">
<p><span>$&nbsp;&nbsp;&nbsp;&nbsp; 289</span></p>
</td>
<td valign="top">
<p><span>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0</span></p>
</td>
<td valign="top">
<p><span>$&nbsp;&nbsp; 289</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>Recruiting &amp; Training</span></p>
</td>
<td valign="top">
<p><span>$&nbsp; 2,439</span></p>
</td>
<td valign="top">
<p><span>$&nbsp;&nbsp;&nbsp;&nbsp; 541</span></p>
</td>
<td valign="top">
<p><span>$1,898</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>Total Cost per Screener</span></p>
</td>
<td valign="top">
<p><span>$41,208</span></p>
</td>
<td valign="top">
<p><span>$39,021</span></p>
</td>
<td valign="top">
<p><span>$2,187</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>Number of FTE Screeners</span></p>
</td>
<td valign="top">
<p><span>2,200</span></p>
</td>
<td valign="top">
<p><span>1,333</span></p>
</td>
<td valign="top">
<p><span>867</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>Total Screener Cost</span></p>
</td>
<td valign="top">
<p><span>$90.66M</span></p>
</td>
<td valign="top">
<p><span>$52.02M</span></p>
</td>
<td valign="top">
<p><span>$38.64M</span></p>
</td>
</tr>
</tbody>
</table>
<p><span>Source: </span><a href="http://archives/republicans/transportation.house.gov/Media/file/112th/Aviation/2011-06-03-TSA_SPP_Report.pdf"><span>http://archives/republicans/transportation.house.gov/Media/file/112th/Aviation/2011-06-03-TSA_SPP_Report.pdf</span></a><span>)</span></p>
<p><span>I expect TSA will ignore this report when it promulgates its "cost-efficiency" standard for SPP&mdash;but members of Congress with both aviation security and taxpayers in mind should not let them get away with this. House Homeland Security Committee Chair Rep. Mike McCaul (R, TX) has asked GAO to do a new study on SPP airports, to see if using contractors is "more effective and efficient." I hope his request to GAO requires them to assess the House T&amp;I study, in addition to GAO's own previous efforts. On the other side of the aisle, the Committee's Ranking Member, Rep. Bennie Thompson (D, MS) has introduced legislation to "reform" SPP, including restoring TSA's discretion to veto applications from airports&mdash;a power TSA assumed despite language in the 2001 Aviation &amp; Transportation Security Act granting all airports the right to opt out of TSA screening.</span></p>
<p><a href="#top">&raquo; return to top</a></p>
<p><span><strong><a name="b"></a>A Mixed Picture for U.S. Airport Growth</strong></span></p>
<p><span>Two recent reports suggest future airport growth may not be as robust as expected only a decade ago, but within this broad outline there will be definite winners and losers. The FAA forecasts robust growth rates for a number of large airports (but very limited growth for other large hubs), while MIT suggests tougher times ahead for small and medium hubs.</span></p>
<p><span>The FAA's <em>Terminal Area Forecast Summary, FY 2012-2040</em>, was released several months ago. Its detailed forecasts cover the 30 large hubs the agency now designates as "core" airports. The three fastest-growing core airports, as measured by enplaned passengers, are projected to be Kennedy (JFK), Orlando (MCO), and Houston Bush (IAH), each of which is shown with annual growth rates of over 3%. Lowest enplanement growth rates are forecast for Memphis (MEM), LaGuardia (LGA), and Reagan National (DCA). The forecasts are similar for projections of aircraft operations. The table below shows the 14 core airports with the highest and lowest growth rates.</span></p>
<table border="1" cellpadding="3" cellspacing="3" width="100%">
<tbody>
<tr>
<td valign="top">&nbsp;</td>
<td valign="top">
<p><span>Enplanements</span></p>
</td>
<td valign="top">
<p><span>Rank</span></p>
</td>
<td valign="top">
<p><span>Rank</span></p>
</td>
<td valign="top">
<p><span>Operations</span></p>
</td>
<td valign="top">
<p><span>Rank</span></p>
</td>
<td valign="top">
<p><span>Rank</span></p>
</td>
</tr>
<tr>
<td valign="top">&nbsp;</td>
<td valign="top">
<p><span>Growth Rate</span></p>
</td>
<td valign="top">
<p><span>2011</span></p>
</td>
<td valign="top">
<p><span>2040</span></p>
</td>
<td valign="top">
<p><span>Growth Rate</span></p>
</td>
<td valign="top">
<p><span>2011</span></p>
</td>
<td valign="top">
<p><span>2040</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>JFK</span></p>
</td>
<td valign="top">
<p><span>3.37%</span></p>
</td>
<td valign="top">
<p><span>6</span></p>
</td>
<td valign="top">
<p><span>2</span></p>
</td>
<td valign="top">
<p><span>2.57%</span></p>
</td>
<td valign="top">
<p><span>13</span></p>
</td>
<td valign="top">
<p><span>9</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>MCO</span></p>
</td>
<td valign="top">
<p><span>3.19%</span></p>
</td>
<td valign="top">
<p><span>13</span></p>
</td>
<td valign="top">
<p><span>7</span></p>
</td>
<td valign="top">
<p><span>2.79%</span></p>
</td>
<td valign="top">
<p><span>22</span></p>
</td>
<td valign="top">
<p><span>12</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>IAH</span></p>
</td>
<td valign="top">
<p><span>3.18%</span></p>
</td>
<td valign="top">
<p><span>9</span></p>
</td>
<td valign="top">
<p><span>5</span></p>
</td>
<td valign="top">
<p><span>2.16%</span></p>
</td>
<td valign="top">
<p><span>7</span></p>
</td>
<td valign="top">
<p><span>3</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>IAD</span></p>
</td>
<td valign="top">
<p><span>2.79%</span></p>
</td>
<td valign="top">
<p><span>22</span></p>
</td>
<td valign="top">
<p><span>18</span></p>
</td>
<td valign="top">
<p><span>1.54%</span></p>
</td>
<td valign="top">
<p><span>19</span></p>
</td>
<td valign="top">
<p><span>17</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>MDW</span></p>
</td>
<td valign="top">
<p><span>2.70%</span></p>
</td>
<td valign="top">
<p><span>26</span></p>
</td>
<td valign="top">
<p><span>24</span></p>
</td>
<td valign="top">
<p><span>1.89%</span></p>
</td>
<td valign="top">
<p><span>28</span></p>
</td>
<td valign="top">
<p><span>23</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>LAS</span></p>
</td>
<td valign="top">
<p><span>2.66%</span></p>
</td>
<td valign="top">
<p><span>10</span></p>
</td>
<td valign="top">
<p><span>8</span></p>
</td>
<td valign="top">
<p><span>1.99%</span></p>
</td>
<td valign="top">
<p><span>8</span></p>
</td>
<td valign="top">
<p><span>6</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>PHX</span></p>
</td>
<td valign="top">
<p><span>2.60%</span></p>
</td>
<td valign="top">
<p><span>8</span></p>
</td>
<td valign="top">
<p><span>9</span></p>
</td>
<td valign="top">
<p><span>2.09%</span></p>
</td>
<td valign="top">
<p><span>9</span></p>
</td>
<td valign="top">
<p><span>10</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>. . . .</span></p>
</td>
<td valign="top">&nbsp;</td>
<td valign="top">&nbsp;</td>
<td valign="top">&nbsp;</td>
<td valign="top">&nbsp;</td>
<td valign="top">&nbsp;</td>
<td valign="top">&nbsp;</td>
</tr>
<tr>
<td valign="top">
<p><span>HNL</span></p>
</td>
<td valign="top">
<p><span>1.75%</span></p>
</td>
<td valign="top">
<p><span>27</span></p>
</td>
<td valign="top">
<p><span>28</span></p>
</td>
<td valign="top">
<p><span>0.76%</span></p>
</td>
<td valign="top">
<p><span>27</span></p>
</td>
<td valign="top">
<p><span>27</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>BOS</span></p>
</td>
<td valign="top">
<p><span>1.64%</span></p>
</td>
<td valign="top">
<p><span>19</span></p>
</td>
<td valign="top">
<p><span>21</span></p>
</td>
<td valign="top">
<p><span>0.78%</span></p>
</td>
<td valign="top">
<p><span>17</span></p>
</td>
<td valign="top">
<p><span>21</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>DTW</span></p>
</td>
<td valign="top">
<p><span>1.47%</span></p>
</td>
<td valign="top">
<p><span>17</span></p>
</td>
<td valign="top">
<p><span>19</span></p>
</td>
<td valign="top">
<p><span>0.37%</span></p>
</td>
<td valign="top">
<p><span>11</span></p>
</td>
<td valign="top">
<p><span>19</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>DEN</span></p>
</td>
<td valign="top">
<p><span>1.44%</span></p>
</td>
<td valign="top">
<p><span>5</span></p>
</td>
<td valign="top">
<p><span>11</span></p>
</td>
<td valign="top">
<p><span>1.04%</span></p>
</td>
<td valign="top">
<p><span>4</span></p>
</td>
<td valign="top">
<p><span>8</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>DCA</span></p>
</td>
<td valign="top">
<p><span>1.17%</span></p>
</td>
<td valign="top">
<p><span>25</span></p>
</td>
<td valign="top">
<p><span>29</span></p>
</td>
<td valign="top">
<p><span>0.25%</span></p>
</td>
<td valign="top">
<p><span>24</span></p>
</td>
<td valign="top">
<p><span>30</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>LGA</span></p>
</td>
<td valign="top">
<p><span>1.05%</span></p>
</td>
<td valign="top">
<p><span>20</span></p>
</td>
<td valign="top">
<p><span>27</span></p>
</td>
<td valign="top">
<p><span>0.15%</span></p>
</td>
<td valign="top">
<p><span>18</span></p>
</td>
<td valign="top">
<p><span>26</span></p>
</td>
</tr>
<tr>
<td valign="top">
<p><span>MEM</span></p>
</td>
<td valign="top">
<p><span>0.11%</span></p>
</td>
<td valign="top">
<p><span>30</span></p>
</td>
<td valign="top">
<p><span>30</span></p>
</td>
<td valign="top">
<p><span>0.98</span></p>
</td>
<td valign="top">
<p><span>21</span></p>
</td>
<td valign="top">
<p><span>25</span></p>
</td>
</tr>
</tbody>
</table>
<p><span>The picture is considerably bleaker for medium, small, and non-hub airports, according to a May 2013 report from the MIT International Center for Air Transportation (Report No. ICAT-2013-02, "Trends and Market Forces Shaping Small Community Air Service in the United States"). Researchers Michael Wittman and William Swelbar don't offer an explicit forecast. Rather, they analyze trends in domestic departures over the period 2007-2012, finding that while this figure decreased 8.8% for large hubs, medium hubs had 26.2% fewer departures in 2012, and small hubs 18.2% less. Their assessment of what is happening is that airlines have been implementing "capacity discipline" in order to return to profitability. This involves consolidating services at large hubs, and reducing frequency to those hubs from small and medium hubs (as well as cutting out less-profitable direct flights to small and medium hubs). Another trend is "right-gauging" of service to small and non-hub airports, such as replacing two 50-seat regional jets with one 76-seater.</span></p>
<p><span>The MIT capacity-discipline thesis is supported by data in the above FAA table, in which even for high-growth airports, the growth rate of enplanements is nearly always significantly higher than the growth rate of aircraft operations. And I think Wittman and Swelbar are probably correct in their estimate that "small communities will not be able to recover the same level of service in the near term that they received in the capacity expansion era." But they don't expect many small airports to lose all air service, either, given the rise of what they call ultra low cost carriers (such as Allegiant and Spirit).</span></p>
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<p><span><strong><a name="c"></a>Cockpit Security Under Threat</strong></span></p>
<p><span>In Issue No. 75 (January 2012), I wrote about a new analysis that compared the cost-effectiveness of several cockpit security measures. That report, by academic researchers Mark Stewart and John Mueller, compared the cost-effectiveness of the Federal Air Marshals program with that of two less-costly measures to protect airliner cockpits: secondary barriers to protect the cockpit when the door must be opened in flight and the Federal Flight Deck Officer Program, under which pilots can volunteer for training and then be authorized to have a gun in the cockpit. Both turned out to be hugely more cost-effective than the FAM program. Unfortunately, these two low-cost but highly effective measures are both under threat.</span></p>
<p><span>The Administration's FY 2014 budget calls for spending $826.5 million on FAMs, a slight decrease from the FY 2013 post-sequester amount of $858 million. But the budget also proposes to eliminate all funding for the FFDO program, which got only $23.4 million last year. By contrast, a TSA budget based on serious analysis would zero out the FAMs and increase the modest sums recently spend on FFDOs. Thus far, there is no indication of what the Senate would do on either program. <em>Transportation Weekly</em> reports that the House budget would cut slightly the Administration's FAM request, but lists as "unknown" what it would propose for FFDOs.</span></p>
<p><span>A different threat has emerged regarding secondary cockpit barriers. Pilots at United Airlines are protesting a recent decision by airline management regarding such barriers on Boeing 787s. At least for United, 787s are produced with secondary cockpit barriers installed as standard equipment. (Since the 787 is a two-aisle aircraft, there is one barrier at the head end of each aisle.) When the 787s were grounded due to the well-known battery problem, United decided to remove the secondary barriers, leading to ongoing protests from pilots and their union, ALPA.</span></p>
<p><span>In previous issues, I had praised United as the only U.S. airline to deploy secondary cockpit barriers on its entire fleet of jetliners, starting in 2004. Both Airbus and Boeing now offer such barriers as optional equipment. But the United of 2004 is now the result of the merger of Continental and United, and the CEO is former Continental CEO Jeff Smizek. Pilot sources tell me that it was Smizek himself who made the decision to remove the barriers from the 787s.</span></p>
<p><span>I know that in cost-conscious times, airlines have made what seem to an outsider as penny-ante decisions to save very minor amounts of aircraft weight, thereby saving fuel. And removing the secondary cockpit barrier does save a few pounds&mdash;the barrier is a kind of slotted gate with horizontal bars. But it seems to me that airlines have their priorities all wrong. They would save a lot more than a modicum of fuel cost if they could get Congress to eliminate (or greatly reduce) the costly, ineffective FAM program&mdash;which forces them to give up two first-class seats on each flight that is "protected" by FAMs. Armed pilots and secondary cockpit barriers would be a lot more effective, since they would be in place on most or all flights, compared with the small fraction of flights that actually have FAMs on board.</span></p>
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<p><span><strong><a name="d"></a>Airport Privatization Gaining Altitude, says ACI Director General</strong></span></p>
<p><span>In her recent speech at the Aero Club of Washington, Angela Gittens&mdash;Director General of Airports Council International&mdash;presented figures that must have surprised many of those in the audience. According to tabulations by ACI, some 450 commercial airports worldwide now have some form of private-sector participation in their management or ownership. That number includes airports in which investors own a minority stake, some majority-owned by investors, and others managed and operated (but not owned) by investor-owned companies under long-term concession agreements. Gittens also noted that 25 airport companies are listed on stock exchanges, including two in Southeast Asia, three in Mexico, five in China and the rest in Europe and Australasia.</span></p>
<p><span>ACI's database breaks down the 450 airports with private management and/or ownership into 170 in Europe, 138 in Latin America, and 98 in the Asia-Pacific region, with the&nbsp; balance in other regions. In terms of types of private-sector involvement,&nbsp; 251 airports are being operated under long-term concessions (typically of the build-operate-transfer kind), 152 are privately owned (in whole or in part), and 47 are being operated under management contracts.</span></p>
<p><span>Gittens also offered some perspectives on the privatization trend. While many governments in recent years have decided that, "under the right economic conditions they can successfully turn to the private sector for the financing and operation of airport infrastructure," both governments and investors have grown more sophisticated over time. Investors have seen that airports can be reliable earners of revenue, but do not generate "spectacular" returns that short-term investors seek. And governments have also learned to approach privatization deals more cautiously, to ensure adequate investment in capacity and ongoing maintenance, and including provisions for early termination of deals that aren't working out well.</span></p>
<p><span>As a relative latecomer to the airport privatization trend, the United States can take advantage of lessons learned over the past 25 years or so, as well as benefitting from the capital amassed by scores of global infrastructure investment funds and the development of world-class airport companies as potential bidders.</span></p>
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<p><span><strong><a name="e"></a>New York Airports Group Up and Running</strong></span></p>
<p><span>In the February issue of this newsletter, I welcomed the formation of a group to promote the improvement of the New York City metro area's major airports. Last month, the group&mdash;Global Gateway Alliance&mdash;unveiled its initial priorities and announced that Stephen Sigmund, former chief spokesman for the Port Authority of New York and New Jersey&mdash;will be the group's executive director.</span></p>
<p><span>The Gateway Alliance's initial top priorities are the creation of HOV (car-pool) lanes on major airport routes, wi-fi in all terminals at Kennedy (JFK), LaGuardia (LGA), and Newark (EWR), and priority for implementation of NextGen ATC improvements in the New York area (which would reduce congestion nationally as well as at the region's major airports). Other announced goals include replacement of the aging Central Terminal at LGA, faster and friendlier security screening, increased air cargo volume, more customer service agents in terminals, improved mass transit access to the airports, improved airport roadway circulation and signage, and improved taxi and limousine service. That's not exactly a short list.</span></p>
<p><span>Jeffrey Zupan, senior transportation planner at the Regional Plan Association (RPA), pointed out a glaring omission to this wish list: more runway capacity, especially at JFK (which is projected by the FAA to be the nation's fastest-growing major hub airport over the next 30 years). RPA did a major study of the feasibility and cost-effectiveness of runway additions at the three airports in 2011, and concluded that such additions were feasible at EWR and JFK.</span></p>
<p><span>In addition to seconding Zupan's recommendation to add runway expansion to the Gateway Alliance's priority list, let me add two amendments. To pay for the new runways, the airports should adopt runway congestion pricing, which is now legal in the United States thanks to a policy change put through by former DOT Secretary Mary Peters. Second, to improve the performance of the proposed HOV lanes on major airport routes, they should be developed as congestion-priced HOT lanes, which buses would use at no charge and other vehicles (taxicabs, drivers running late, etc.) would use in exchange for a variable toll. This would ensure that these lanes remain uncongested even during peak commuting hours, and the revenues would help to pay for the costs of adding these much-needed lanes.</span></p>
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<p><span><strong><span style="font-family:"><a name="f"></a>Airport Development, Financing and Privatization in Europe</span></strong></span></p>
<p><span><em>The information in the following article (which is believed to be correct at the time of writing) and comment is by David J Bentley of Big Pond Aviation, Manchester, UK. </em></span><a href="http://www.bigpondaviation.com"><span><em>www.bigpondaviation.com</em></span></a><span><em>.</em></span></p>
<p><span>Apart from the build-operate-transfer (BOT) concession for the new Istanbul airport (which I'll deal with another time) the big story during April and May has been the conclusion to Hochtief's almost desperate search for a buyer for its stake in a clutch of airports in Europe (Athens, Budapest, Dusseldorf, Hamburg and Tirana) plus Sydney in Australia. The Essen-based construction conglomerate wholly-owned none of its airports through the Hochtief Concessions division (which worked closely with Hochtief Airport Capital &ndash; claimed to be the world's first airport-specific investment fund), with the equity varying between 30% at Dusseldorf to 50% at Budapest and Hamburg, but just 12% at Sydney. The latter airport was the jewel in its crown nonetheless, but some of the shine is starting to come off as the Australian economic roller coaster finally comes to an end.</span></p>
<p><span>Otherwise, both Hamburg and Dusseldorf airports were strong performers while Tirana Airport, in the capital of Albania, surprised many with its growth. Budapest remained a problem, having lost its national airline (Malev) and having subsequently found itself at the whim of Ryanair, which is now the second biggest carrier there, and Wizz Air, the largest and also an LCC. It has fallen well behind Vienna in the race to be the principal gateway airport for Central and Eastern Europe.</span></p>
<p><span>Combined, the Hochtief airports handle approximately 95 million passengers annually. The reason for the sale was to reduce group debt and so that Hochtief (now owned by ACS Infrastructure) could invest more in the operating infrastructure business, including surface transport and energy infrastructure. After a lengthy competitive tender Hochtief's shares were sold to a subsidiary of the <strong><span style="font-weight:normal;">Public Sector Pension Investment Board of Canada (PSP Investments), which looks after the pension plans of the Canadian Mounties and other public employees, for approximately &euro;1.1 billion (US$1.435 billion). Following EU approval, closing is anticipated in the second half of this year.</span></strong></span></p>
<p><span><strong><span style="color: windowtext; font-weight: normal;">This is PSP's first successful venture into the airports sector although it was attracted to the concession process for the Luis Munoz Marin airport in Puerto Rico, later joining a consortium led by Chile's Agunsa. It is one of six Canadian pension funds currently active in the airport infrastructure sector.</span></strong></span></p>
<p><span>Breaking news as I write (30 May) is that the French government intends to reduce </span><span>its majority stake in Aeroports de Paris (ADP) in a sale of &euro;700 million (US$908 million) worth of shares (10 million) as it seeks to free up funds to invest elsewhere in an economy mired in recession. The government will retain a majority stake; it currently owns 54.5% of ADP, while the state-sponsored FSI strategic investment fund holds a further 5.6%. A partial IPO of ADP took place in 2006. Since then another construction conglomerate, France's Vinci, has indicated it would like to buy into ADP, but it has had to be content with some small-scale management contracts at French regional airports. Eventually it moved on and bought Portugal's ANA Airports last year, but it will doubtless be hopeful that this decision by the French government in respect of ADP might hasten the sale of the larger regional airports like Marseille and Toulouse that it really covets (and which has been delayed for at least five years). The state hopes to complete the sale in the coming weeks and would favor offers from sovereign funds, pension funds and French institutional investors.</span></p>
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<p><span><strong><a name="g"></a>Upcoming Conference</strong></span></p>
<p><span><span style="text-decoration: underline;">Global Airports PPP Conference</span>, the 3<sup>rd</sup> Annual AAAE/LeighFisher Airport PPP Conference, June 2-4, Westin Georgetown, Washington, DC. (Robert Poole speaking) Details at: </span><a href="http://www.events.aaae.org/sites/130604/index.cfm"><span>www.events.aaae.org/sites/130604/index.cfm</span></a></p>
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<p><strong><a name="h"></a>News Notes</strong></p>
<p><span style="text-decoration: underline;">$6.5 Billion Airport for Turkey</span>. The Turkish government has selected the five-company team of Kolin, Mapa, Kaylon, Cengiz, and Limak to finance, develop, and operate a new $6.5 billion airport for Istanbul, under a 25-year BOT concession. It was one of four finalist teams bidding for the huge project, which will be the world's fourth-largest airport with three runways and 750,000 sq. meters of terminal space. The new airport will be linked to the third Bosphorous Bridge, currently under development.</p>
<p><span style="text-decoration: underline;">O'Hare Getting New Customs Kiosks</span>. In a move to speed up processing of international arrivals, U.S. Customs &amp; Border Protection will implement 32 Automated Passport Control self-service kiosks at Chicago's O'Hare Airport. Arriving passengers will be prompted to answer a series of questions by the kiosk, after which it will print a receipt which the passenger will present to a customs agent, along with his or her passport. The system was initially developed by Vancouver Airport Authority, in conjunction with CBP, for preclearance of U.S.-bound travelers departing from Vancouver. O'Hare will be the first U.S. airport to install the system.</p>
<p><span style="text-decoration: underline;">Charlotte Counting on Railroad Yard Revenue</span>. In an interesting example of the airport city concept, Charlotte's airport is leasing unused airport land to Norfolk Southern to create an intermodal rail yard. The project is under construction and is expected to open late this year. It will not be affected by the possible change in airport ownership from the city to a new airport authority, which is still being debated by the state legislature.</p>
<p><span style="text-decoration: underline;">India to Increase Airport Investment, Including PPP development</span>. According to Civil Aviation Minister Ajit Singh, India needs $12 billion in airport investment between now and 2017, to cope with the expansive growth forecast by the International Air Transport Association, among others. Singh told <em>Aviation Daily</em> that the government's aviation plan for 2012-2017 envisions $9.3 billion of the $12 billion "to come from the private sector for construction of new airports, expansion, and modernization." IATA recently forecast that India will be the world's third-largest aviation market by 2020.</p>
<p><span style="text-decoration: underline;">New Zealand Airline Wants New Airport Regulation</span>. A draft report from the government's Commerce Commission estimates that Auckland Airport will earn a return of 8-8.5% during the next five years. But because the Commission's target is 7.1-8%, Air New Zealand sees the report as grounds for changing the current "light-handed regulation" policy. The Commission itself, in its draft report, says the policy is working well. And Auckland Airport says its benchmarking of charges at comparable airports finds Auckland's charges are in the middle of the pack.</p>
<p><span style="text-decoration: underline;">Gary Airport Loses Only Scheduled Airline</span>. Gary-Chicago International Airport will lose its only scheduled airline service in August, the <em>Chicago Tribune</em> reports. Allegiant Airlines will operate its last flight from the airport on August 10<sup>th </sup>, pulling out due to low demand for its twice-weekly service to Orlando-Sanford Airport. This does not bode well for the airport's intended privatization.</p>
<p><span style="text-decoration: underline;">Kansai Airport Wins International Award</span>. At its global summit in Leipzig May 23<sup>rd</sup>, the International Transport Forum presented its 2013 Transport Achievement Award to New Kansai International Airport Company (NKAIC). The company was created last year to merge the management and operation of Kansai International Airport and Osaka International Airport. The company's funding of a low-cost carrier terminal and price incentives for off-peak landings and take-offs have spurred the development of low-fare competition in Japan. In the process, government subsidies for Kansai International Airport have been reduced to zero, and NKIAC plans to offer concessions for the management of both airports</p>
<p><span style="text-decoration: underline;">City Council Approves $4.8 Billion Improvements for LAX</span>. By a vote of 10-3, the Los Angeles City Council on May 1<sup>st</sup> approved a $4.8 billion plan that will shift the north runway 260 feet further to the north (to facilitate A-380 operations and increase safety), replace Terminals 1, 2, and 3, consolidate rental car facilities, add an automated people mover, and create an airport transit station. The runway relocation faces strong local opposition from airport neighbors, who are promising to litigate.</p>1013402@http://www.reason.orgFri, 31 May 2013 18:22:00 EDTbob.poole@reason.org (Robert Poole)